finance and business, ideas and opinions

Broken businesses can be fixed

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“We are not going to make payroll this week” says someone from the accounting team to the entrepreneur(s) running the business. “WHAT! How the #$*! did that happen?” is the response followed by a series of emotionally charged words that would make anyone listening feel very awkward ūüė≥.

Believe it or not this conversation is not unusual. In fact, any company that is growing and reaching new levels of revenue will most likely have a conversation like this a few times on their journey. Conversations like this usually lead to more conversations about the broken parts of a business that result in cash not being available to meet obligations.

But broken businesses can be fixed.

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finance and business, growth

What would it take to double your revenue?

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Many entrepreneurs and business owners dream of growing their business and generating massive amounts of profit but few actually achieve this. There are probably thousands of content pieces available to inspire, educate and provide instruction on how to successfully grow your business and yet many businesses fail, hit a peak or never really get traction. The few that do are success cases that prove it can be done but somehow seem to be just out of reach for the every day entrepreneur working away at their dream. Why is this? I believe its because what seems to be a simple question can’t be answered and isn’t even contemplated by many individuals running a business.

What would it take to double your revenue?

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growth

Where can you find money to grow your business?

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Growing a business means different things to different people. Some businesses grow unintentionally due to demand for their product or service while others grow intentionally a result of executing on a plan. In either case a business needs money to grow and its not always obvious where the money can be found. There is money available from numerous sources to help you grow your business but you have to understand where to find it and what the trade offs are.

Where can your business find money to grow?

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finance and business

What’s the business #goal?

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“If you don’t know where you are going you’ll end up some place else” as said by Yogi Berra and used in different variations in almost every business book or self help book. There can be truth in common sayings and any quote or wisdom about getting where you plan to be even if you have no plan is more than half true. It is 100% true.¬†Every business will end up exactly where it plans to be. In the face of no plan a business will¬†do fine during a good market¬†and will be in trouble during bad market. To the extent that a business knows what its goal or destination is, it will be able to grow and survive during good and bad times. For many small and medium sized businesses the “goal” can often be one of survival with no long term hopes or expectations. This is unfortunate because I believe many businesses fail due to their lack of planning and goal setting. My own experience teaches me this as does twenty years of working with entrepreneurs and business owners that have found themselves in need of financial¬†help.

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finance and business

How are you taking #money from your business?

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They say interest is a silent killer in any business. This is because you don’t really notice the impact it has on your profitability until you can look at an¬†accumulated amount over a period a time to see how much of your profit actually goes to interest. It turns out that the money taken out of a business by an entrepreneur or the owners can also be an unnoticeable drain on profitability. Many small and medium sized business owners treat their business finances as an extension of their personal finances instead of treating their business like an investment. What many fail to realize is that without a policy or process around how owners take money from their business they may be doing more harm than good to their bottom line.

How are you taking money from your business?

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ideas and opinions

Where’s my money?

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This is a question I encounter many times when reviewing the cash flow and profitability of a business with either the entrepreneur or person running the business. It is usually followed by a very frustrating conversation that involves going through accounting terminology and concepts that are foreign to the person I am speaking with. Once the frustration subsides there is usually some excitement about what can be done with this new found knowledge and while it can be difficult to follow the cash flow and profits of a business the work is worth the effort and can produce improvements in profitability and overall value.

Where is the cash going in your business…specifically?

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finance and business

What are pro forma financial statements?

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What is your balance sheet going to look like next year? The year after? What about three years from now? Do you care? Many times the answers to these questions are: not sure, no idea, don’t know and yes I care but I don’t have the information to properly answer these questions. It’s very typical for a small or medium sized business to not know what their financial statements are projected to look like over the coming year much less the next three years. Many times they will have a budget (that is usually inconsistent with their historical performance) but haven’t done the work to take the budget one step further and have it flow into an actual set of pro forma financial statements.

What are pro forma financial statements and why do they matter?

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