Financing Your Telecoms Startup Into A Global Telecoms Business

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Your telecoms business is part of a £55 billion industry. Recognised by the UK government as one of 13 critical national infrastructure sectors, effective telecoms services are vital to both consumers and businesses.

From smartphones to super-fast broadband, digital dependence is here to stay.

This technological revolution has led to the transformation of business telecoms solutions: we’ve progressed beyond fax and phone to video conferencing and VOIP, instant messaging and intranets.

This digital explosion means the opportunities for growth among telecommunications companies like yours are astronomical. Billions of people across the planet want what you sell: the latest telecoms tech delivered by experts at an affordable price.

Here we explore how, with the right finance, you can supercharge your start-up and turn it into a global telecoms business star.

Embrace the Opportunity

growing telecoms business

More than any other sector, telecommunications companies must stay ahead-of-the-game to survive. Clients expect the best, the latest, the easiest, the safest.

Increasingly, your competitors are investing and growing. Perhaps, as a one-stop shop, they’re offering tempting full-service packages to individuals and businesses who might previously have chosen you.

Think back to when you first wrote your telecoms business plan. Whether it was two years ago or ten years ago, the tech landscape you based it on will have evolved.

Maybe you started out by simply selling phone handsets or broadband packages. Since then, with the convergence of voice-based telecoms and data communications more or less complete, you’ve dipped a toe into expanding your offering.

Now you’re considering your own growth strategy, one that’s scalable, smooth and sustainable. One that delivers secure cashflow, can adapt to changes in market conditions and can lead your business into an exciting new lifecycle.

Are You Ready to Grow?

No matter how eager you are to put your growth strategy into action, the timing has to be right. Get it wrong and you could be making a costly mistake. 

Use your judgement to honestly assess whether now is the best time to go for it. Ask yourself the following:

If the answers raise any obvious obstacles or insurmountable doubts, hold your horses. For now. 

But if you’re ready to take the leap, read on to discover the routes you can follow to become a global telecoms business.

How to Grow Your Company

When it comes to your growth strategy, there’s no blueprint. It needs to be bespoke to your business and industry.

However, there are several options to pick and mix from. Each one could hold the key to launching your start-up into the telecoms stratosphere:

1. Diversification

Expanding your portfolio of services is an exciting opportunity for growth. It will give you the chance to reach new customers and tap into new markets while boosting profits. 

If you currently specialise in phone systems and numbers but haven’t yet added cloud VOIP services to your offering, this would be a natural addition to introduce.

If you pride yourself on exceptional broadband packages, consider branching out into smartphone sales.

Beyond product diversification think about your target market. If you’ve been focusing mainly on consumer clients, recognise the potential of B2B customers.

Where once revenues were lower and margins thinner, the B2B market is predicted to grow by 2.6% annually, compared to just 0.6% for the consumer telecoms business.

From home offices to large multi-nationals, every member of the UK workforce needs access to some form of telecoms tech to boost productivity, increase engagement and encourage loyalty.

From mobile devices, workplace and off-site Wi-Fi, and efficient landline systems, expectations for efficiency and affordability will continue to grow. And the pace of technology adoption will also keep speeding up. While it took decades for the landline phone to appear in 50% of households, it took just five years for mobile phones to reach the same penetration levels. 

As Dan Adams, partner and head of telecommunications at Deloitte, says: “The smartphone will drive much of the next phase of business process reinvention, providing a digital tool for the tens of millions of workers in the UK whose roles are not desk-based. It’s a once-in-a-generation innovation whose full potential is far from realised.”

2. Differentiation 

Consumers don’t want the same old, same old. They’re searching for something special, whether that’s exceptional, personal service, unbeatable affordability or bespoke solutions designed exclusively for them. 

Think about what will lift your business telecoms solutions above the ordinary. How can you personalise them to meet your customers’ expectations? How can you satisfy their unmet needs? How can you secure their loyalty?

3. Innovation

You’re operating in a world of rapid tech advancements: innovation is everywhere. 

Get a slice of the pioneering pie by either establishing your own in-house development team or embracing cutting-edge, customer-centric ideas that few competitors are offering.

Your brand will be seen as trailblazers offering the latest transformative tech, gaining a stellar reputation, winning awards etc. You get the picture.

4. International markets

Unsure about branching out into unknown products and services? Why not explore unknown territories instead?

If you’ve exhausted the UK market but have perfected a winning formula, consider exporting it beyond the confines of one country and becoming an international specialist. 

5. Franchising

Another option if you’re confident in your proposition is to replicate it via a franchise. Licensing your business formula can provide a substantial revenue stream as well as acting as an effective brand-building mechanism.

Sharing your expertise and the secrets of your success will start a whole new chapter for your business.  

6. Acquisition 

As the overlap between various telecoms services continues to blur, going down the acquisitions and/or mergers path could reap rich rewards.

Buying or joining other companies is a sure-fire way to capitalise on new markets and a fast-track to working with competitors, buying-in experienced staff and acquiring the latest tech.

Look at the Bigger Picture

Once you’ve pinpointed your strategy, incorporate it into your telecoms business plan. Figure out the objectives, the budget, the KPIs and draft some ‘What if?’ scenarios to keep you on your toes.

How to Fund Your Growth Plans

Your quest to become a global telecoms business is going to need a serious injection of cash.

Few businesses are in the privileged position to have thousands of pounds readily to hand. Instead, finding the funds to support expansion plans needs its own specific strategy.

Step One

Assess if you can release funds from within the business:

  • Allocate a set amount of spare cash in your business account to Project Growth
  • Analyse where you could cut costs. Consider switching suppliers, negotiate bulk discounts or see how you could restructure staff.
  • Check what assets you could sell, e.g. underused equipment, old pool cars etc.
  • Overhaul your payment system and reduce your cash cycle. Collecting regular payments by Direct Debit can help here by creating reliable cashflow.

Step Two

Explore your borrowing options. With a trading history in the bag, you’re in a better bargaining position than back in the start-up days thanks to your proven business model.

Lenders are also more likely to recognise the potential of your plans due to the industry’s size and strength.

There are many funding sources available. Pick one or combine several to create your own bespoke ‘jigsaw funding’ package:

  • Arranged overdrafts can free up cash if your plans aren’t overly ambitious. However, banks are becoming reluctant to offer them and interest rates are high, so they should only be considered for short-term, low-value borrowing.
  • Bank loans are the most common form of debt financing for SMEs. Secured against an asset, such as a house or business premises, these loans are paid back via monthly instalments with interest.  If you can prove the success of your business model and have a compelling telecoms business plan, this is the most straightforward route to finance.
  • Equity funding can put a large sum of money straight into your business account. Because you’re selling a share in your business, there’s no need for monthly repayments. However, you will need to pay an agreed percentage of profits to investors after a set time period. If you’re happy to relinquish some control – and profit – this is an option worth considering.
  • Mezzanine loans strike a balance between equity and debt financing. Popular among telecommunications companies, they’re a flexible way to raise funds without surrendering shares in your business. Instead the funds given by the lender are secured against the future success of your enterprise. Flourish and you’ll simply repay the debt with interest. Fail and investors have the right to lay claim to an agreed amount of equity. This is a gamble but, with thorough preparation and hard work, can pay off.
  • Asset finance can be used to fund assets such as expensive servers and IT systems which may otherwise be beyond your budget’s reach. Instead of forking out tens of thousands of pounds on this crucial equipment, spreading the costs make it all affordable. If you’re unable to pay the monthly payments, the lender can simply repossess it.
    • Hire purchase (HP) lets you spread the cost of buying over several years. After paying a deposit, you then make a monthly repayment until the asset becomes your property.
    • Leasing better suits items with a limited lifespan such as IT hardware and vehicles. There’s no upfront payment, just a monthly cost. At the end of the lease period, you can update to the latest equipment. This is especially beneficial for the telecoms sector to keep up with the pace of tech change.
  • Revolving credit allows you access to pre-approved funds which need to be paid back by a pre-specified time. Once you’ve repaid that amount, you can then withdraw more as and when you need it. Secured on your business assets, this option is helpful to meet fluctuating demands within your budget.
  • Invoice finance/discounting: a form of short-term borrowing that can improve your cashflow and free up funds. It involves entering an agreement with a finance company who will lend a percentage of your outstanding invoices. Fees and interest for this type of service make it an expensive option and of course you need to have a substantial amount of unpaid cash to tap into.
  • Grants are awarded to businesses via both government schemes and private companies. Often limited to smaller amounts, they can serve as a useful top-up if you meet the eligibility criteria.
  • Friends and family could give you a helping hand if they have deep pockets. Despite your personal connection, you should approach this as you would any other business funding arrangement: present your business plan, get professional advice to carefully agree terms and treat the deal with respect.
  • Alternative funding is a growing trend focused on securing funding from outside the banks. Crowdfunding, business angels and sponsorship agreements can all generate cash in an unconventional way.

Supporting Your Growth Plans

With funding in place, now the real fun can start: putting your growth strategy into action.

Whatever your focus – portfolio expansion, the international market, acquisition – you’ll be meeting a growing demand for the ultimate tech, the tightest security and the most advanced communication channels.

growth plans 

 

As your business shifts into its exciting new lifecycle, it’s an opportune time to analyse existing processes that could inadvertently hinder growth. What’s working well? What’s causing headaches? What could scupper the goal of becoming a global telecoms business? 

For example, study your customer segmentation strategy and decide if it’s still sufficient for your new offering. Could you more carefully tailor products and services to their needs? Are you capitalising on the power of machine learning to discover more about your clients?

Assess your current training systems and decide if they’re adequate to support your staff, including new recruits, through this period of expansion. If a merger or acquisition isn’t on the cards, upskilling your team will be vital to success.

And take a close look at your cashflow situation. If you’ve entered into an invoice financing agreement, this relied on having enough outstanding payments. Although handy as a source of funding, this level of missing money is anathema to cashflow.

The latest figures from Bacs show that UK SMEs are facing a total bill of £6.7 billion to chase late payments. This accounting black hole can seriously damage your cashflow, customer relationships and even the entire future of your business.

Wherever your growth funding comes from, overhauling your payment system can often pay dividends, especially if you have modular solutions packages that cost £XX per month.

As your telecoms business grows, you’ll acquire more and more of this type of client who make a regular payment for a specific selection of services. 

If you’re collecting these payments via a mish-mash of methods, such as cards, Standing Orders and cheques, your admin load will be unnecessarily heavy.

Instead, encouraging existing and new clients to switch to Direct Debit will bring a host of benefits to you and to them.

Once only available to larger, corporate businesses who paid banks many thousands of pounds to manage their schemes, technological advancements mean SMEs like yours can take Direct Debit payments.

Outsourcing collection to a Direct Debit bureau like FastPay means you’ll enjoy steady cashflow thanks to regular, predictable payments. The higher the percentage of customers who set up a Direct Debit, the more secure your cashflow will be. Some businesses remove all other payment options, others see take-up rates as high as 90%.

Just as you do for your clients, FastPay makes digital integration possible. Use a specially-designed API to connect your billing system to your bureau’s software or you can fully integrate the Xero and Sage accounting apps with FastPay’s processing system.

The result is a highly-automated, seamless process that gives you increased payment efficiency, reduced admin time and a real-time cash overview.

Simplifying how you collect payments will also move your growth into the next gear by meeting the demands and expectations of your customers. They’ll have an easy, secure and reliable way to pay you, boosting their loyalty and your reputation.

The time is now to grab your share of the billions of pounds being spent by billions of individuals and companies across the world on business telecoms solutions.

Your start-up has proved itself and is ready to transform into a fully-fledged global telecoms business.

A business that meets soaring demand with exceptional products and services, is structured for maximum scalability and is destined for continued growth.

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