Strategic advice, Truist Business Lifecycle Advisory 3 things to know about seizing opportunities in the established stage

Catalysts for business transformations can be wide-ranging. You might be looking to keep up with rapidly advancing technology or comply with shifting regulatory compliance requirements. But Vara says one of the most common transformation triggers is adapting to shifting consumer tastes.

“I’ve seen this recently in the beverage industry,” he says. “One of my clients is an established beer distributor that expanded its portfolio through acquisitions in niche markets to include kombucha and other increasingly popular nonalcoholic drinks.”

Another trend Vara notes is a surge in data center construction that recently helped a steel cable manufacturer double its revenue. “This client’s product is now in higher demand, and they’re tapping into that market,” he says.

Truist’s focus on industry specialization is a distinct advantage to clients looking to stay on top of trends and identify needs in the marketplace that they could step in and fill.

“Our industry experts track trends, indices, and SKU velocity across our portfolio,” says Vara. “They can share real-time benchmarks so clients can see where they lag behind their peers and pinpoint where their innovation budgets belong.”

Once you’ve identified a demand in the marketplace, here are three questions you should consider:

• Has my competition already spotted this trend? Your Truist relationship manager can tap into insights on market maturity trends to discover whether adoption is still early or if the market is already crowded.
• Is my team ready to meet this need? No matter what change you decide to make, you’ll need skilled staff to execute the plan. Evaluate whether upskilling and other tactics can help or if you need to attract new talent.
• Can I afford this? Changing your business model can require investments in equipment, facilities, and human resources. Your Truist relationship manager can help you optimize your capital structure so you’re ready to act on opportunities when they arise.

Once you’ve identified a growth opportunity, acting on it might involve revamping product lines, expanding into new regions, beginning or ramping up a digital transformation, engaging in mergers and acquisitions (M&A), or even rebranding or restructuring. All these moves can help you grab more market share and boost profits, but they may come with different risks for mature businesses than for companies in the early and growth stages.

Vara notes six common risks associated with business transformation and their impact on companies in the established stage.

• Integration missteps: While early- and growth-stage companies may have limited brand equity to damage, well-known companies could face stronger backlash if customers notice a disruption.
• Culture clash: Small, entrepreneurial teams often have the flexibility to pivot quickly, but longtime employees in a large corporation may be reluctant to adopt new workflows or embrace a culture shift.
• Liquidity strain: Early- and growth-stage companies usually have venture capital to cushion cash burn, but established businesses often have high debt levels, which can make financing a transformation tricky.
• Execution speed: Businesses in the established stage often have a high level of complexity, which can slow the adoption of new processes.
• Stakeholder scrutiny: While early- and growth-stage companies may have just a few investors to appease, established companies may have shareholders, rating agencies, regulators, and unions all watching the transformation’s progress.
• Cybersecurity and privacy: At the established stage, you may have a mix of legacy IT systems and newer cloud apps, creating a more complex cyber footprint that could leave you vulnerable to hackers as you grow.

“The bottom line is any misstep from an established company is going to reverberate harder,” says Vara. “Customers expect consistency, lenders expect covenant integrity, and employees are accustomed to steady workflow. Therefore, risk mitigation must be more rigorous.”

These tactics can help mitigate the risks of business transformation in the established stage.

• Boost your company’s decision-making ability with a governance upgrade. Add business leaders who have experience with transformations to your board of directors.
• Place a premium on data-driven decision-making. Collecting data throughout the transformation can help inform your next steps and alert you if the process isn’t meeting your objectives.
• Celebrate the small wins. Seeing early pilot successes can help build cultural buy-in from your team faster.

Since established companies are often highly leveraged, debt financing may not be the first choice when raising capital to fund growth initiatives. Vara says the Truist approach is to start by mining the balance sheet—allowing clients to tap the cheapest capital first.

“With established companies, we find ways to reallocate working capital that’s trapped in inventory or receivables before suggesting new debt,” says Vara. “That might include using automation to reduce days sales outstanding (DSO) and speed up cash conversion.”

For example, Vara says reducing DSO by just five days on a $300 million revenue base can free up roughly $4 million in cash. “Most clients can capture these ‘low hanging’ working capital wins within one quarter,” he notes.

Another way Truist can tailor funding strategies for established businesses involves staging liquidity in layers so business leaders can dial their funding up or down without reapplying for credit.

“The first layer is a revolving credit facility for everyday expenses,” says Vara. “Next would be a term loan for known, depreciable assets like equipment. And the last layer would be a delayed draw term loan that allows businesses to tap into the funding as they hit certain milestones in their growth plan.”

Truist’s industry specialization helps with another key factor for established companies embarking on a transformation: speed.

“Our industry specialists can translate strategy into credit language, which leads to faster approvals,” says Vara. “For example, in the food and beverage industries, our specialists know things like commodity cycles and shelf-life risk, so we can anticipate underwriting questions before they arise. Clients spend less time educating the bank and more time executing strategy.”

All these factors add up to a lending approach that preserves the hallmarks of an established company—brand, cash flow stability, and lender confidence—while arming leaders with the capital and agility they need to transform their business.

“Executing a transformation as an established business is a big undertaking,” says Vara. “But with stage-specific guidance through Truist Business Lifecycle Advisory, you’ll have the tools, solutions, and insights to fuel success at every step.”