I find it intriguing that I see the same challenges in most of the clients we work with, and just how many business owners are grappling with the same problems.
The most common problems that we see when we first meet a business are:
- A persistent anxiety about money
- Not making enough profit
- Cash flow is too tight
- The owner isn’t earning what they want and think they’re worth
- The business is causing the owner too much stress
- And the business isn’t giving them the life they want
But of course, these aren’t really problems at all. They’re the presenting symptoms of what’s causing them. Like chest pains aren’t the problem, it’s what’s causing them that you want to worry about!
Run faster, work harder
And by focussing on the obvious problems of not enough profit and cash, most people take the “run faster, get more sales, work longer hours” approach, which never fixes the real issues. In fact, it often makes things worse.
When we drill down to the actual problems, we find something quite different.
These are the 6 most common unsolved financial problems in most businesses:
- Not having a plan and a financial strategy
- Poor, basic or no financial management information
- Confusing or bad advice from their accountant
- A lack of financial understanding in the business
- Turnover and staff growth without underlying financial strength
- Unknown route to market and inconsistent marketing
1) Not having a plan and a financial strategy
This is just SO fundamental and yet so few business owners know what they want from their business and what they need it to provide for their future. So unsurprisingly they don’t know what profit their business needs to make each year.
When you have a clear plan that you’re excited about you find a way to make it happen, you find the resolve to do the difficult things that will make it possible, and quickly weed out the time wasters. Without a plan you keep lurching day to day, hoping something will change.
Running a business is tough – if you’re not sure where you’re headed, what do you think the odds are of ever stumbling across it?
The right financial plan will show you exactly what you need to get the financial results you want, then all you need to do is make that plan happen.
2) Poor, basic or no financial management information
I talk about this a lot and it sits at the heart of what we help our clients with. Great financial information is like a huge mirror and gives you 360 visibility of your business; you can see quickly if something is off track and take fast action. If you’re running your business without monthly information, or just using what your accounting system spits out, then you just won’t have the control you need to achieve your plan.
3) Confusing or bad advice from their accountant
This isn’t to knock accountants, but honestly, we come across this a lot, and it makes business owners really angry when they find they’re not where they thought they were, or they’ve been following bad advice.
To be fair this is often because they’re not paying their accountant enough for the advice they want, or their accountant is only geared up for year-end accounts and tax returns. The key lesson here is always that as a business owner you can’t afford to abdicate financial responsibility to anyone, and if you understand your financial plan and know where you’re heading, you’re more likely to spot the duff advice.
4) A lack of financial understanding in the business
It sounds pretty obvious that if the owners and managers don’t understand their own finances that it’s unlikely they’ll ever make real money consistently. Every successful business owner at some point has realised they need to learn at least the basics if they want to make and keep money.
5) Turnover and staff growth without financial strength
I’ve written about this a lot before. Success is not about how many people you employ; how gorgeous your office is or what your turnover is. If you don’t grow your financial strength as well you’ll make your business more vulnerable, and put it under ever-increasing cash flow pressure.
6) Unknown route to market and inconsistent marketing
I really do believe that we can never have control over our future if we don’t know how to consistently bring in sales. And this means deeply understanding our route to market, ie how we reach our target customers. And once we’ve nailed that one, we have to market consistently, not just when the pipeline’s looking lean. Companies that do this well have consistent sales, those that don’t, don’t.
If you’re serious about your business and the future you want from it I hope you’ll look at these common mistakes and make sure you’re not making any of them.
19 years working with small businesses has taught me how doing the simple things consistently makes all the difference.
Success is rarely about the complicated strategy, or the “big break” but knowing what you want, having a plan of how to get it, and taking action on the most important things every day.