Transcript
Hello, I’m Justin McKeand, Vice President of Strategic Markets at Oak Street Funding. Today, I’m going to be answering questions about how businesses are funding expansion in 2026. Some things I’ll be covering are how approaches to funding have changed compared to previous years, common mistakes businesses make in the process, what paths of expansion are frequently being pursued, and more.
What are the most common ways businesses fund expansion?
The two most common methods are via owner cash injections or debt facilities. Owner cash injections can be helpful for organic growth strategies, like marketing or purchasing leads. The debt component is more common when pursuing inorganic growth which usually requires more up-front capital. I’ve also seen owners raise capital and fund expansion through business equity sales and bring in new ownership - but most entrepreneurs don’t want to dilute their ownership and their income potential over the long term.
How has the approach to funding growth changed?
The declining interest rate environment has created a less fearful attitude from business owners toward incurring debt. That’s great news since a lot of owners, especially in the CPA space, are nearing retirement age. At the same time, multiples and valuations are holding steady or increasing - I see aggressive multiples more frequently in the RIA space. Those factors working in tandem turn potential sellers into actual sellers and create more acquisition opportunities across the board.
What factors are business owners weighing when choosing the right approach to fund expansion?
The right funding method depends on several things. I would say it mostly comes down to long-term strategy. Business owners need to do an honest self-check-in to figure out if the short-term benefit outweighs the long-term costs. For example, we often see RIA deals where the principal advisor will recruit other advisors to move their books of business over. Specifically targeting FA’s who may not have current upward mobility or income expansion opportunities outside of just growing their assets under management, and offering them equity ownership in the overall firm can be beneficial for several reasons. Not only can it grow revenue in the short term, but it also creates an atmosphere where that newly added advisor is hungry to grow their individual book and the overall business revenue. It establishes a clearer path to succession by creating a team mentality where one person’s success translates to everyone’s success. It also decreases the likelihood of that new advisor making a move to a different firm in the future since they’re vested.
Did the original business owner dilute their ownership in this case? Yes. But by attracting new talent and getting them excited to grow the business as a whole, that owner’s previous 100% equity valuation could be eclipsed by their future 80% valuation.
Would you rather have 100% of a grape or 80% of a watermelon?
What paths of expansion are businesses frequently pursuing right now?
I am seeing a lot of growth via acquisitions in the insurance industry right now, due to the continued “hard” market. Agency owners are feeling that organic growth is too slow and time-consuming; and often too costly.
I have talked with a handful of RIA firms recently who are targeting growth by changing their revenue model to a family-office. Instead of charging their clients a fee to manage their investments, they charge a tier-based fee, usually quarterly or monthly, while also offering tax-advisory and tax-preparation services as well as insurance services. Since those different components of a client’s world are so inter-related, it can be beneficial to work with an individual relationship manager who not only understands what their clients’ pictures look like but can also make adjustments without having to refer them outside of the firm.
What’s one mistake you see businesses make when funding expansion, and how can they avoid it?
I’ve seen several businesses chase after what’s right in front of them at the current moment. Owners have pursued acquisition opportunities or hiring opportunities or even a marketing-related opportunities based on the “immediacy” instead of the strategy. For example: a CPA firm I was working with inquired about acquiring a cross-town competitor because the seller was in a health scare and was offering to sell at a discount. When we talked through the details of the merger…
What does the seller specialize in? Is this an area you want to expand upon and spend more of your time?
What will happen with the seller’s team?
How does your team’s experience and expertise translate to servicing and growing the seller’s book?
…my client realized they were only interested in the potential revenue growth. They didn’t want to spend more of their time or their employees’ time providing the services that the seller’s book specialized in.
The takeaway is this: funding growth has costs, and they’re not all monetary. When owners have a specific strategy around how they want to grow and stick to that strategy, it helps them filter through the noise and be efficient with their time and effort.
Looking ahead, what should businesses owners be thinking about now if they want to position themselves for growth over the next 12-24 months?
Business owners can increase revenue in dozens of different ways. They need to be honest about what’s preventing them from growth today, and develop a plan to work around those obstacles. Owners should determine how they want to grow and focus there, specifically, without getting distracted by other possibilities. They should understand what they’re willing to give up now for what they could potentially have in the future, and vice versa. They should be aware of their business’s current numbers, specifically how each service or product contributes to overall revenue, and their cash flow.
At the end of the day, growth in 2026 comes down to clarity. Knowing your goals, understanding your cash flow, and choosing the right type of capital. If expansion is on your radar over the next 12 to 24 months, now is the time to start planning. Thanks for watching and we wish you success in the year ahead.
