The Danger Zone is where your business is just getting by. In the Danger Zone it can take just 1 unexpected event or 1 poor month of sales to cause your business some real pain, or even take it down.
For too many businesses, living in the Danger Zone has become a way of life, but there IS another way.
Do any of these sound familiar?
- You’ve got just enough cash to pay your suppliers, but there isn’t any real head-room and sometimes (or often) have to pay your suppliers late.
- Paying your VAT bill on time, in full, is often a challenge.
- Tight cashflow has just become a way of life for you.
- You spend too much of your time fire- fighting and juggling your cashflow.
- You know your business would be in trouble if you lost your best customer.
- You don’t do very much financial planning, you don’t feel you’ve got control over your finances, and you don’t get the information you need to be in control.
So if these are signs of being in the Danger Zone, what do things look like over in the success zone?
- You’ve got at least 3 months operating costs in the bank as a buffer.
- You know you could lose your biggest customer and still be comfortable – it wouldn’t cause a crisis.
- If you had a significant change in your business you’ve got time and the money to regroup and you don’t have to panic.
- You regularly take time out to plan your future.
- You have strong financial control, and you get great financial information that tells you everything you need to know about your business.
- You know what your business risks are, you regularly review them, and you’ve got a plan if one of them happened. (Remember the Financial Icebergs from last week?)
If you are in the Danger Zone, please don’t just think that’s the way it has to be. The signs are telling you something needs to change in your business, certainly if you want your business to survive long term. Living like that just isn’t sustainable, and with only 44% of companies making it to their 5th birthday, (and 20% making it to 10 years) it’s going to be the smug ones in the Success Zone who make it that far!