The journey of a business owner is riddled with financial twists and turns. As a business grows, so do the financial challenges. So it’s no surprise that, for some entrepreneurs, managing finances can seem like a complex puzzle.
Of course, no two businesses are the same. Different businesses have different levels of financial understanding and need different support at different stages. It may surprise you to hear that, in general, the bigger the business, the less input they need from me. It’s horses for courses. My support changes depending on the size of the business.
In the first of a series of blogs on money matters for business owners, I’ll be focussing on smaller businesses which, in my experience, need more help and support.
Top financial issues faced by small business owners
99 times out of 100, financial challenges won’t go away. If you bury your head in the sand and pretend they’re not there, they will come back with a vengeance.
How do I know? Early in my entrepreneurial career, I didn’t understand my financial issues so ignored them thinking they would go away.
They didn’t. So now, I want to ensure that other business owners don’t make the same mistakes I did.
Issue: The business has outgrown the owner’s financial knowledge
Smaller businesses may not rarely have a Finance Director in post. The business owner often oversees their finances themselves based on what they’ve picked up as they went along with little financial training.
As a result, it’s easy to lose control of their management accounts or not look at them as much as they should to get the most from them. Yet, finances are like the instruments on a plane. Would you board a plane where the pilot didn’t look at the instruments?
Issue: The business owner doesn’t track cash flow
Cash flow is the lifeblood of a business. One of the main reasons businesses fall over is through lack of cash. That’s why understanding where your cash is going (e.g. in your bank account or in client’s bank accounts) is vital.
It’s the only way to get a complete picture of the cash available to you so you can forecast potential profits and make informed financial decisions.
Issue: Turnover is big. Profit is small
Sometimes businesses have high turnover and low profit, which can feel like you’re pedalling hard but getting nowhere.
Substantial turnover is nice to have but it’s a blunt tool of measuring business success. It means nothing if profit margins are disappointingly thin.
No one wants to work hard and take on the stress and responsibility of running a business to not earn much. Profitability and cash is the thing that makes a difference.
How a business coach can help small business owners
Not knowing the numbers can bite you very hard very quickly. Having been in the trenches building and selling seven successful businesses, I can help you master your financial destiny.
Your financial translator
I’m not an accountant. It’s my job to act as an interface between clients and accountants to make sure my clients understand the information they’re getting so they can make informed choices based on their numbers.
Good decisions are based on good information. If you’re not analysing your accounts enough and asking questions about them, you won’t have the data you need.
Of course, you don’t know what you don’t know. I can help you know what’s needed and explain your numbers in a way you’ll understand.
Your number cruncher
With smaller clients, I always ask to see the management accounts and have them talk me through the numbers so I know they understand them.
I grill them hard to ensure they’ve thought it through. What do the finances tell you? Can you afford to do what you want to do? I encourage them to track key numbers and put them into graphs so they can spot trends.
You don’t need a 500-line spreadsheet. Sometimes too much information is as bad as not enough. Together, we break it down into manageable chunks we can understand.
Pretty much every time I do this with a client, we find something they don’t recognise and they need to get to the bottom of it. Getting everything out on the table is the first step to dealing with it.
Looking at the numbers isn’t just about spotting financial concerns. You might realise that there is money left on the table that could make your business more profitable.
For example, one client realised staff were leaving work constantly throughout the day to buy snacks. By installing vending machines in the workplace, the client was able to stop people leaving the premises and make a profit from the items in the machines.
Your personal challenger
As well as analysing their business numbers, I also challenge clients on their understanding of their own personal finances. This is because, when you’re too focussed on business success, it’s easy to put personal finances to one side.
Yet your job is to primarily look after you and your family, whether it’s paying off mortgages, investments and pensions, school fees, etc.
I help clients realise that the business is the engine room that finances their family financial goals. In short, achieving business success leads to personal freedom. A gap analysis will help you understand what the business is producing (X), what you need to give your family what it needs (Y), and the difference between the two.
Ready to navigate the money maze?
No matter what size your business may be, I’m committed to empowering you to master the art of money management so your business is best placed for long-term sustainable growth.
To arrange a no-obligation chat about your money matters, book a call today.