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Business Failure – How To Avoid The Pitfalls

BY: Andrew / 0 COMMENTS / CATEGORIES: Business Planning


Why is there such a high rate of failure among small businesses?

Bloomberg states that 8 out of 10 entrepreneurs who start a business fails within the first 18 months – a failure rate of 80%!

Small businesses accounting for 99.3% of all private sector businesses in the UK and 99.7% in the US is a major factor, but more importantly is the problems faced by small business due to cashflow and poor financial management.

We are well aware of the economic downturn since the Financial Crisis in 2007/8 and are now being encouraged by the news that recovery is on the way.  Unfortunately for us, small businesses suffer these effects more than our larger counterparts.  As they usually have larger buffers in terms of cash, stocks etc. to save for a rainy day.

But It Can’t All Be Due To The Downturn

In a recent study by, they found that the reason why US small businesses fail was:

  • They were out competed (19% of all failures)
  • They didn’t have the right team (23%)
  • They ran out of cash (29%)
  • There was no market (42%)
  • They experienced cashflow problems (82%)

So How Can These Issues Be Addressed?

A critical discipline that must be adopted is having a sound credit management system.  Business can’t fail through a lack of profits but they can through a lack of cash. 

This is made far easier by having a computerised accounting system and instead of waiting until the debt is overdue to find out that there is a problem, implement a system whereby you invoice as soon as possible and remind, remind, remind until you are paid.

A computerised system can not only provide you with the minimum financial information you legally require, it can also provide useful management data that will make running your business far easier. 

It can help you forecast by providing trends, margins and plan, whilst giving you useful information to aid your decision making.  In a CIMA study 54% of businesses stated that their accountant failed to assist with the strategic development of the business, a management accounting system can.

We cannot leave it to factors outside our control to determine the future of our business; the main driver must be the owners/directors. 

If you identify a weakness, take immediate steps to resolve the situation before it’s too late.

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Entrepreneur – Man or Machine?

BY: Andrew / 0 COMMENTS / CATEGORIES: Personal Development

In light of recent worldwide events such as 9/11 and the terrorist events in London, Paris, Brussels and recently in Las Vegas, more and more people are taking steps to improve the quality of their lives. 

One such step is to get away from the corporate world and embark on a new journey as an entrepreneur.

In fact, according to the Pew Research Center, three-in-ten U.S. jobs are held by the self-employed and the workers they hire.  That’s 44 million jobs or 30% of the national workforce.

The benefit of this is that you can be your own boss, put your ideas into action, potentially earn more and have control over your time. 

Factors such as the lack of job security and economic uncertainty also prompt individuals to take the plunge. 

What Does It Take?

So what does it take to be an entrepreneur? 

Are you born with it, or can it be taught? 

In my opinion the greatest determinant of the success of an entrepreneur is their character and their skills. 

To be an entrepreneur you have to be ambitious, you have to want to achieve, and you have to want to be successful.  You are going to make a poor start if there is no powerful driving force.

Stating your own business isn’t easy; expect several years of really hard work, it’s extremely challenging and stressful. 

It won’t feel it at the time, but when you look back you might even say it was fun. 

One word of caution, however difficult you think it will be, expect it to be a lot worse. 

The volatility and uncertainty of starting your own business is the buzz and when the point of financial stability is achieved, nothing beats that sense of achievement.

What Is It You Want?

I always consider what I hope to achieve out of every venture I get involved in. 

This would cover money or wealth, working hours, risks (if I invest in it), stress, independence, achievement, power and so on. 

I then match this to the particular project in hand and decide whether it fits the bill.

Will Your Business Survive?

Did you know that half of all businesses never survive longer than 5 years? 

You may just be unlucky; failure can be through no fault of the entrepreneur. 

Should this ever happen to you, you need to assess the situation, be honest to yourself about the contributory factors and move on. Learning from your experience is crucial as nobody gets it right first time, or even every time.

Can You Do It?  Yes You Can!

A good entrepreneur must contain all the skills possessed by a salesman, an accountant, an inventor – and then some.  But none of this even matters if you have this one skill…

This can be encompassed in one word – passion. 

Without it, you haven’t got any chance of achieving anything remarkable. 

It’s not to say that you can’t make a profit without passion, but extraordinary results comes only through extraordinary drive and determination.

To improve your chances of success there are three elements that you should consider:

  1. Identify your strengths and weaknesses and try to overcome any shortcomings.

  2. Ensure that the market has the necessary growth potential for your idea to work.

  3. There is enough Cash to cover your needs and there is also a secondary source of cash available should growth be slower than expected.

  4. As with all factors in life, planning is the key, ‘if you fail to plan, you’re planning to fail.’

I wish you all the best of luck in your endeavors, if these steps are followed you stand a great chance of success!

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Do You Have A Doctor On Board?

BY: Andrew / 0 COMMENTS / CATEGORIES: Business Planning

According to the USA Today, 4 in 5 US businesses will not be around to celebrate their first-year anniversary.

As you can imagine, businesses go under for a variety of reasons; lost orders, poor forecasts, bad or no controls, no cash, litigation, the list is endless. Where there’s a business activity, there’s a potential reason for failure.

No business performs according to plan each and every day so why doesn’t the owner see the warning signs?

They usually do, but in the case of the businesses that I have been advising, they either ignore them, hoping that they would go away, or they simply see them far too late.

Addressing The Cause

And acting isn’t good enough if you don’t address the cause of the problem. Ploughing more of your own personal funds into the pot to sure-up the cashflow won’t help. You must reduce your outflows because the problem will return to haunt you in weeks or months to come!

Is cash the first of the alarm bells? I would argue that it isn’t.

Your staff should alert you where there’s a problem, for example credit control may alert you that a customer is not paying, or your accountant may notify you that profit margins have fallen.

Not Getting Paid

How can you remain cash positive if you are not receiving the money you are owned, or making enough profits in the first place?

OK, so you have a problem and several months later it’s still there, you take your head out of the sand and decide to do something about it.

You ask yourself “have I got the necessary skills or experience to resolve the issue?”

The clock is ticking, you can’t delay paying your suppliers, you’ve had final notices and more importantly pay-day for your staff is just around the corner, so what do you do?

I would suggest you turn to a professional, a specialist like a company doctor, who has the experience to help you turn the ship around before it runs aground.

There will be some of you out there thinking, I have managed this business for years; it has grown from nothing to where it is today, why do I need help?

Outside Help

The simple answer is that at certain stages of any business’s life it will need outside help, whether it is a loan to purchase new equipment, legal advice, who knows…

No-one will question what you have done, the past does not matter, what is important is that your business has a future.

Imagine on the football pitch, a player gets injured, he doesn’t treat himself, he calls on his medical team to ensure that his career and future is not jeopardised and that is what you may need to do.

There are many reasons why each of us decided to run our own businesses, don’t let pride get in the way of seeing it flourish and grow.

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