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This question is really subjective as it is totally dependent on what success looks like for you – and that will be different for everyone.

I really believe that your vision has to be yours alone – it can’t be what an accountant, coach or consultant tells you it should be – that never goes well!

But I’ve created my own rule book over the years of what I see as financial success measures and characteristics of a ‘successful’ business, which I want to share with you now.

Profit: What exactly is a ‘good’ profit?

The rule I’ve come up with working with hundreds of companies is that 10% net retained profit after tax and dividends works well. I work a lot with agencies and consulting firms, and they can make anything from 20% – 30%.

Making and retaining net profits builds financial strength into your business each year, which does 4 things:

  1. It helps you build that buffer cash which will protect you if a problem hits you – e.g. a sudden downturn in sales, loss of a big customer, a bad debt or other expected cost
  2. It lets you take advantage of opportunity – e.g. buy a new business, be able to buy in bulk to get a better cost, invest in new equipment or training, or a treat for you!
  3. You should do a ‘fortnightly finance fix‘, when you do bank transfers and payments
  4. It’s a significant driver of the value of your business.

Cash:

 I have THREE rules about cash:

  1. You have to be able to easily pay all bills as they are due – never late
  2. You should money to pay all your taxes, VAT and corporation
  3. You should have at least 3 months overheads in a separate account as buffer cash

Pay yourself properly:

There’s no point making a good level of retained profit if you don’t pay yourself properly – who are you kidding?

You need to make sure your business model really stacks up and can afford to pay you a proper salary, i.e. what you’d have to pay someone to do your job. Otherwise you’re just subsidising your own business.

Pension:

Make sure you’re using your business to invest in your pension and you’re never too young to start doing this.

Getting 100% tax relief on this is a no-brainer so make sure your business can afford to fund your pension (no one else is going to).

Don’t assume that you’ll sell one day and not need a pension. Building a valuable business isn’t easy and building a pension as you go gives you a lot more security.

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.