Business Failure v Business Success?

Businesses fail for many reasons but nearly all of them cite outside forces working against them - rent or rate rises, parking charges, delays caused by suppliers, no support from the bank, etc, etc.

What they don't think about is that maybe they are selling the wrong product, or perhaps the right product for the wrong price, or the right product in the wrong location.  Maybe their customer service is off putting.  The staff may seem disinterested in helping someone to choose a product and prefer to continue their personal conversation.  Perhaps their telephone voice is bored or unhelpful.  

Every customer will have experienced one of these from a business they have approached but business owners just can't see it and prefer to blame the outside world.  It is so important to continually re-evaluate what you do and how you do it and look at your business and its offerings from the customers' perspective. 

But there may be other reasons the business is not successful.  How many businesses simply fail because they don't manage their cash flow or the owner is drawing too much from their business?  Many business owners think they can put whatever they like through their business and although a bookkeeper or accountant will divert it to "drawings" these expenses are still draining cash from the business that is needed to pay wages and suppliers.

Everyone needs a certain amount of money to live on and when you start a business it is very difficult to accept that you will have to take a drop in income, especially if you have a family to support.  However you cannot take more money out of the business than the amount left after you have deducted your business costs from the income you generate.  You also need to leave enough in your business to pay your tax.

During the 15 years I have been in business I have come across many situations where business owners do not seem to understand the effect drawing too much from their business has on its success. They put all sorts of personal things through their business and then say "I don't earn much".  If they take a look at what they do take our I think they would be surprised how much they do "earn". 

If you think that having a business means you can regularly take your customers and potential customers out to lunch, buy yourself the latest gadget or have a company car then you don't understand the implication this will have on your business.  Yes, its nice to be able to have all the things you want and not have to pay for them but can your business support those costs?  Your priority is to pay your suppliers - the people who provide you with the materials or goods or services that you sell.   When your cash flow can sustain the business expenses and the money you need to have to support your personal commitments, then you will be able to buy the other things you want for your business.

If you want to be able to take more money out of your business the best ways of doing this is by reducing your overheads and increasing your turnover.  Increase your turnover by ensuring you are providing the best you possibly can to your customers in terms of product and service, making sure you have the product or service that people want to buy  and reviewing the price you are charging to ensure you are covering your costs and making a profit.

Business owners have so much to do and think about that they can't always see what is happening with their business so an outside resource can provide a welcome insight into what is really happening.  There are lots of accountants, bookkeepers and business advisors who can help as long as you are willing to listen and consider what they suggest.  

If you are struggling with your business and are blaming everything outside and not looking at what is happening inside your business then get some advice.  There are grants available for business support which can help you to turn the corner.

The business owners we work come to us because we help them to see the wood for the trees.  Being a business owner is a lonely place and having someone to talk things through with who can go through the accounts with you is just some of the value we add for our clients.  We work with lots of different businesses at different stages and can provide some support, some advice and a usually a recommendation of someone who can help as well as good bookkeeping support and peace of mind.  If you feel you need some support with your bookkeeping and understanding your finances please give us a call.

Don't let your business be one of those which fails in 2019 because you didn't look at your numbers, re-evaluate your offering or check your customer service.