Over a 5 week period I am going to talk about a range of challenges facing many small to medium businesses and we will also touch on what they can do about it. How they can plan a strategy to overcome it.
I will say at the start of this that I am also available to help anyone with these challenges and we can set up some time to focus on you and your business and see how I can help you.
This is the 2nd week of the series and I am going to look at an area that is often not focussed on enough at the start of any business and can lead to poor practices as the business develops.
If you are starting a business, you can easy struggle with running the business, its expenses and also managing personal living expenses. This means that when people start businesses often it is while they are working. The goal here will be proving the concept yes, but also building up much needed capitalisation and reserves to be able to take on the challenge full time. Without those reserves being of adequate value, you can simply run out of time, alternatively you can keep going but the stress levels attached to running a business on a shoe string can take its toll.
One of the key issues with financial aspects is, therefore, that it is probably the one area when starting a new business that you do not focus on enough. You know you will need support by way of a bookkeeper or accountant.
The focus therefore goes on the product or services you want to deliver, the offering and the customers you want to target. Essentially these are the cornerstone of every start up. You get help with many things from business groups, friends and family, and even potentially national or local government initiatives, which can all be incredibly helpful. The one area, however, they also seem to lack in is the financial aspect. You will find grants for new staff, maybe support in marketing, legal, social media and they do a brilliant job at that.
The financial steps are relatively easy to begin with and they include doing simple analysis of various aspects and linking those into a Cashflow or, if easier for you, straight into a Business Plan:
- What can you sell your product/service for in the market place?
- How much can you sell in a given time period?
- What costs do you need to make to get the product or start your service?
- What expenses will you need to make to support the above?
These are easy enough and most people fully understand this aspect, on a small scale in a simple business it is very manageable with the right reserves. It gets more difficult as you start to see more and more costs. Understanding more complex aspects are very important though and areas linking outlays to expected sales, scaling up sales to meet growing requirements or expectations, as well as understanding the macro/micro environment, including the competitive marketplace, can be challenging. Many people quit at these kinds of hurdles as the complexity grows. More staff, seasonality of supply of the product or even when people will need your service, all play their part.
For existing businesses you may also need to do more research to improve your product over time, try different marketing strategies, go to different places for support.
Now given we are talking about Finances there are a few key concepts needed to really help you start, scale and hopefully succeed in the longer term. They are not necessarily complicated but you will need to gain this knowledge or refresh your knowledge around key aspects of a
- Balance sheet
- Income statement
- CashFlow Forecast
- Basic understanding of Tax and Allowances
- Detail on pricing including Profit per Unit, Break even analysis
- Where your fund come from and the cost of them – Directors, Borrowing from a Bank (yes even Mum and Dads!!)
Whatever you do, do not underestimate the whole financial management and understanding of your key business drivers or you may seriously impact the future success of your start-up or existing business.
So, if you need some help with this then speak to me and I can support, you could also use Startup4Ten who offer an incredible Online solution and other face to face packages that simply and effectively support the above.