Owning & Marketing a Small Business is bloody hard work!
1st May 2012 by Rachel Willis
Since I left University I’ve started four businesses. Three of them still exist and as of today they’re all doing OK. But, this hasn’t always been the case.
Owning and Marketing your own business is bloody hard work, but starting a business and taking it through its first two years is REALLY bloody hard! Those who say it isn’t are liars!!!
I was recently asked what my one piece of advice would be to someone starting a business and I was stumped. Not because I don’t have any, but because it’s hard to condense all of the learnings into just one piece of advice. In the end I said ‘cash flow’. To me cash flow is king, without cash you don’t have a business, you have a hobby (incidentally that’s what the forth business turned out to be!).
So while I’ve been thinking about what I should blog about this month, this seems like a good way to start. This is the first in a series of blogs I intent to write which focuses on what I’ve learnt about starting and owning a business.
I’m going to start with cash flow, because as I’ve said, it is King!
My advice is to get a cash flow document that works for you. I use an Excel document that shows six months ahead of the current month and allows me to insert all of the outgoings and incomings of the business. I tend to edge on the side of caution so I always have a realistic snapshot of where the business is financially.
There is no point in being optimistic with the cash flow; it needs to show realistically where the business is headed. It can help you make important decisions and be an aid when proving your business value to the bank (although that’s a whole other blog I’m looking forward to writing!). But, and it’s a big but, it’s only of value to you and your business if it’s realistic.
I have a ‘Hard Forecast’ column that shows all of the definite work that’s coming into the business (basically anything I’ve received a Purchase Order for) and ‘Soft Forecast’ which shows all of the work I’m hoping will come in. (Even if it looks very likely a project is going to go ahead, unless I have a Purchase Order it stays in the Soft Forecast.) Having a grip on the finances allows you to forecast forward and see where the business is going in the coming months. It also shows you where you need to generate revenue; bring in extra support and, where necessary, cut back. In all three businesses Cash flow is King. This document tells me all I need to know about the businesses; and more importantly, it shows me if they’re actually making money or not!
A great thing the cash flow document enables us to do is forecast forward. Every business is different, but we tend to forecast forward at least 6 months. This means, crazy as it may sound, that if we’re only forecasting forward say four months, we’ll have a team meeting and discuss cutting back costs and wages. By pre-empting a quiet period or gap in the cash flow you give yourself time to make changes, and importantly make a positive difference to the cash flow in good time!
By cutting wages for example, you’re putting money back into the cash flow that will help you get back on track to forecasting forward 6 months. Then as soon as more business comes in the wages can increase again. This works for the businesses now as they’ve all been running for over three years. However, when they started we forecasted forward three months and worked on as small a start-up cost as possible. I invested personal money in all three business start-ups. For a long time I took only the smallest amount of money I could afford to live on out of the business. Then, once the cash flow looked in better shape and the loans were paid off the wages increased.
Anyway, I think you get the idea. Cash flow is King to me because it runs the business and determines all of the business decisions we make.
Next time I’m going to talk about Banks! Now, I definitely don’t think they’re King. Nor do I think they help much when it comes to running your business, especially when it comes to riding the storm! But, as I said, these are my opinions and I feel I’m entitled to themJ
Please let me know what you think of this post by adding a comment below or getting in touch with me directly.
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