A man I know started his own business. He was smart and had a good business idea.
Almost from the start, everything went well. Customers bought his products and he doubled sales every year. He worked hard and opened a second outlet, then a third. But then, about a year ago, things went from bad to worse until last week Friday when that man was forced out of business. His company closed its doors for good. The man who started with such high hopes had to lay-off his employees, after he paid all outstanding bills, there wasn’t anything left for him.
What happened? What went wrong? How could that have been avoided?
Three things should matter to an entrepreneur:
- Am I making a profit?
- Do I have enough cash to grow?
- Do I grow the worth of my company?
If you have no clear answer to those three questions, then put your finger on the pulse of your business. This is not the job of your accountant, it is not accounting, it is responsible and result-oriented leadership. Task your staff to provide you monthly (better weekly) with concise records of your sales, your variable and your fixed cost. Understand and experience the benefits of your Gross Margin.
You think you can grow your business by growing your sales? Better consult your Balance Sheet and check if you have enough funding available to fuel your Working Capital. Ensure that you are not under-financed, because re-negotiating with your bank when you only reached half way is not a nice thing to do.
Have you ever thought to sell your company? Maybe one day in the far future? Well, start building your company’s worth and ensure your Balance Sheet is up-to-date.
We would be happy to develop a company dashboard and help you to bring your business on a healthy growth path.
The Financial Dynamics approach has been developed and practised for many years by Tim Atterton and his team. Tim is a champion of entrepreneurship and small business. “Work on your bottom line and improve your Net Profit. That’s what good business is all about.” Tim is so right and spot on. Thanks for all the insights Tim.