There have been a couple of high profile business failures this week in the East Midlands, and you can’t fail to have noticed that business failures are definitely on the increase.
Whatever the reasons, and whether we can blame the B word for more uncertainty, I’m convinced that now more than ever we need a strong financial backbone to weather the ups and downs that IS being in business.
I remember very naively in my last business thinking that when we’d just get x sorted then we’d have it cracked and the business would run smoothly forever. Cue unicorns and rainbows. After 19 years in business I now understand that change and uncertainty are a given, and we need to be financially strong to navigate through whatever’s thrown at us.
When the outer signs of success hide the financial fragility of a business
I know I bang on about this a lot, but trying to look successful isn’t the same thing as being successful. Focussing on turnover, staff numbers, profile and outward image takes up a lot of energy that would be better spent on building a business that actually was successful!
You may remember I’ve mentioned the company I worked for back in my early twenties. We were a very fast growing business – £500k to £10m in just 3 years, which is just insane growth, employing hundreds of people with stores all over the country. And in 1993 we crashed into receivership in a dramatic way.
On the surface we were a runaway success. We had a tremendous profile; featured regularly in Retail Week as we opened yet another beautiful store in yet another flagship shopping centre, our seductive adverts appeared in all the best glossy home magazines and the bosses had appropriate cars and lifestyles. We were even the subject of The Money Program as an outstanding retail success.
But scratch that outer veneer and it was a very different story.
We were a very fragile business financially.
The crazy rate of expansion meant that every part of the business was at breaking point, and cash flow was on-the-edge critical every day. We were the cliché of over trading and undercapitalisation. And there was little investment in skills or infrastructure, which is how a 22 year old (me) was running finance.
The heartbreak of the situation was that the business itself was great; wonderful passionate people who would do anything for the business, a fabulous product that people loved and huge potential.
But we didn’t have the financial strength to grow as fast as we did.
And so, ultimately, inevitably the day came where I had to shut the factory down, make everyone redundant, call the stores and ask them to close their doors, and work with the receiver to dismantle our years of hard work.
Build your business with financial strength at the heart
If you can put aside your ego (not easy for us business owners, I know!) and make financial strength your top priority you’ll build a much better business. It may take a little longer but it’s far more likely to last, and give you a secure future. The pay-off of having cash in the bank, taxes put away, 3 months buffer cash set aside, being profitable, and having solid plan for your future is just incredible.
Financial stress has no positive benefit; it stops you thinking creatively and strategically, the stress hormones can create lasting damage to your health, and it’s absolutely no fun!
The Fword Mission
One of my long standing clients sent this to me earlier about the big business failure story that broke this week (if you follow football or live in Nottingham you’ll know who I mean)
“Sorry to clog your inbox but I saw this news story and thought it was clear evidence of the importance of the Fword mission.
We’ve been talking about how having the financial stability and balance means so much more to us than high growth and status.”
Because of the work we’ve been doing together this brilliant business has taken their focus away from top line ego driven growth and instead have consistently grown their financial strength and are on track to build their future financial security.
There IS another way! Drop the ego and build your financial backbone!