Succeeding in business is hard. No one can guarantee success, but there are some surprisingly achievable characteristics of financially successful businesses.
Sadly, less than 20% of businesses reach their 5th birthday. The main reason for not doing so is that they run out of cash. Even companies with growing sales fail. Running out of cash can happen to businesses with poorly performing sales as well as very rapidly growing sales.
The figures become even starker when you look at those achieving their 10th birthday. Just 4%, and the main reason for cessation remains running out of cash.
The good news is that by doing just two things the statistics reverse, with over 90% of businesses achieving their 10th birthday. Every business should adapt these two points from day 1 and let them become part of your monthly procedures.
1) Every successful company has good bookkeeping. They have a system that means they know every month:
- If they are making a profit or not
- If they have the cash to pay the wages at the end of the month
- How much money they are owed by their customers and a process to chase overdue accounts
- How much they owe their suppliers
- If they have enough cash for the next 3 months
They know their numbers every month because their bookkeeping is up to date, reconciled to their bank account, and accurate.
They know which numbers they should monitor – you do not need to be an accountant with reams of numbers, but you do need to understand which – say 5 – numbers give you the comfort of knowing your business is on the right track financially.
2) These successful businesses also have an accountant/business advisor/mentor/coach or similar, helping them grow the business, acting as a soundboard to the owners ideas and most importantly make the owner accountable to deliver the actions agreed and therefore drive the business forward.
Successful business leaders of the largest companies have business mentors, and all will comment on their value in discussing and exploring options. Rarely do such people make decisions, but they help the owner make a decision to deal with an issue.
Our number one message for any business owner, whether starting up or running an established business, whether already successful or currently struggling, is get monthly reporting of your financial performance in place (which can only be done if you have great bookkeeping in place first) and get yourself a business mentor/adviser/coach to share ideas with you and make you accountable for your actions.
If you would like to see how we can help your business, give us a call on 023 8000 1313 or send an email to info@xebraaccounting.co.uk