It’s clearly important to pinpoint the areas of your business that are causing or contributing to your financial issues; you just need to know what to fix first.
Let’s look at some possible reasons why your business might not be working financially:
Cash flow: The number one issue in small businesses
Cash is the ultimate mirror of what’s going on in your business and is affected by just about everything; your level of sales, your gross margin, control of overheads, credit control, supplier terms, what you pay yourself, how you plan for your VAT and Corporation Tax bills, what assets you buy, and what debt you have.
It makes sense then, that you need overall control of your finances if you ever want to control your cash flow.
It’s important to understand here that cash flow is never the problem – it’s not the root cause. But it is the ultimate symptom of anything that isn’t working well in your business.
You haven’t defined what financial success looks like for you
If you want financial success, you have to define what that looks like for you, otherwise how on earth can you tell if you’re being successful?
For one person it might just be being able to pay the bills, for someone else it might be a £10m sale and retirement somewhere fabulous!
The important thing is for you to be extremely clear what your direction of travel is, and what your end game might look like.
Without your definition of success, how can you possibly measure where you are?
You haven’t got a business plan or strategy
Do you have a business and financial plan that reflects your clear vision for your business and the future you’re trying to create?
Without this you’re just showing up every day to see what happens, and success rarely happens by accident.
Even the smallest business should have a clear plan of where it’s headed.
You don’t have enough sales
It could be that you have a sales issue that’s causing the problem; not enough sales coming in to cover your costs and make a profit.
So, your business model stacks up, but for some reason sales aren’t where they need to be.
This might be due to an inconsistency in marketing, sales effort, a lack of sales skills, not having a defined sales process, a lack of visibility of future sales or not enough leads coming in.
Too many sales!
I know, that might seem a bit mad, but if a business grows too quickly it will break.
Growth always costs money, usually more than you’d imagine, and a really common problem in a growing business is tight cash flow (caused by the growth).
So, it’s incredibly important to make sure your growth plans are properly costed and well-funded.
Many a business has gone bust with a full order book but no cash.
This might be an inconsistency in marketing, sales effort, a lack of sales skills, not having a defined sales process, a lack of visibility of future sales or not enough leads coming in.
Marketing that doesn’t work
Obviously, I think that financial skills are critical for financial success, but over my journey so far as a business owner myself, I’ve converted to believing that actually marketing is the magic bullet that can make or break a company.
Without marketing skills it doesn’t matter how fabulous your product or service is, how amazing your customer service is, or how passionate you are about your business. If you can’t find a solid route to market and don’t know how to get your message across to that market very precisely, you’ll never generate the consistent level of sales your business needs to survive and be successful.
Every business needs a strong marketing strategy and a plan that’s executed consistently. Random or adhoc marketing will never work!
Your business model just doesn’t stack up
Sometimes the issue is simply that your business model just isn’t working; the pieces of your jigsaw puzzle don’t seem to fit together.
And by business model I mean what you do, who you do it for, how you deliver it, and what you charge.
So this might mean:
- Not enough people seem to want what you offer
- You can’t charge enough for what you do
- Marketing seems to be never ending battle
- It just feels really difficult to make money doing what you do
- The operation doesn’t seem to work – you can’t consistently deliver high quality without it feeling like really hard work
- Or maybe things have moved on in your industry and it’s time for you to innovate and move with it too
Of course, all of these things could be down to skills and people gaps within your business, so don’t thrown the baby out too soon. Yet if you do find yourself thinking “this just feels too hard” a lot, then maybe it’s time to take it on the chin and pivot into something that can make money?
We offer a structured step-by step approach to take any business to where it wants to be financially. Tell us your dreams, we’re ready to help you achieve them.
Book a free 30-minute call with me
If you’re ready to take action and would like to find out more, you can book a free, 30minute call with me. I promise there won’t be any ‘sell’; that’s just not how we operate – just an informal chat to see if I’m the right person to help you.
To book your call, please email Martin at martin@fwordfinance.co.uk and I’ll get back to you within 24 hours.