New Tax YearEssential business advice with former bank manager Keith Farmer, now chief advisor at BFES
This is the
time when everyone says that you should do a ‘business health check’ to see how
the business has performed over the last year and to prepare for the coming
year.
But isn’t this a waste of time when you know what you did
last year from your accounts and you know what you intend doing next year? Don’t
people know that this is a busy time of the year and we are in the middle of a
recession?
So why bother?
There will be a mixture of
businesses in the commercial world where some are experiencing high growth,
some showing moderate growth, some stagnant, some fighting for survival and
some going down.
But this has always been the case and is not a symptom of
the recession. The difference between
the successful and the failures is due to a number of factors.
The most significant of these will be finance & planning. You will also need to understand the skills
required to manage a successful business, what your skills are and what skills
are missing.
Managing a small business will mean:
- Operating with limited resources
- High levels of uncertainty and external dependency, more so when trading
conditions are hard
- Coping with ‘total’ responsibility and the stress involved
- Managing a wide range of tasks that will include finance, marketing,
operations, production, staff, legal & compliance issues
So if you're not superhuman, what do you do? The first
thing you need to do is the most difficult. Take some time out to really look at yourself, your staff and how they
impact on your business.
Do you and your staff have
all the skills to manage your business? To find out you should complete a
skills analysis and that will provide you with a skills gap.
Once identified you can either train to
obtain these skills, buy them in, or ignore them. The latter being a recipe for future
disaster.
The problem is that when times are hard and cash is tight
can you afford it. I once knew a company that spent more on toilet rolls than
training – possibly why it eventually went
bust, or in their case down the pan.
One of the greatest teams in the
world is the SAS, and they spend the majority of their time training and
improving their skills. This is a
reflection on the importance of training.
The economic climate is not good and people are not spending
money so they have to be enticed to spend their money with you.
However, you need to ensure that your business
is sound before embarking on new strategies. You need profit and the cash resources to succeed.
Was last year a good year?
Many businesses judge their year on turnover as to whether it went up,
down or remained the same? Surely the
prime motive of business is to generate profit and this should be the criteria
on which you judge success.
Planning for profit and
having sufficient cash available is therefore vital. The majority of businesses fail simply
because they run out of cash. They might
have a large order book, a good product but if they cannot pay the wages they
go bust.
What is the point of planning for growth and putting a
marketing plan together if you haven’t got the money to fund it!
Looking at finance these are the sort of questions you
should be asking:
What will I need the money for?
- Working capital
- Capital expenditure
- Salaries/wages
- Growing the business
- Your remuneration
How much will I need?
- Completing a cash flow forecast will tell you
when cash is available
- Completing a profit & loss forecast will
tell you how much
Where do I get it?
- Overdraft facility
- Loan
- Family & friends (if not done properly could upset family
& lose friends!)
- Grant/specialist schemes (extremely limited)
- Inward investment by shareholders, business angels etc., - again
limited and can take time to obtain.
- Your own resources
With the finances sorted
out you can then start to plan the other aspects of your business such as
marketing, operations, production, resources etc.
All of these will need to be looked at and
planned for. It will all take time and
that in itself will need to be planned!
As a business owner it is vital that you review your
business. This should not be an annual
event but an on-going process to provide your business with a greater chance of
success.
Keith provides training and support with the backing of Banks Accountants at only £30 per half-day. You can book a place by contacting Shelly on 01793 616284
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