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Numbers don’t lie: why your SME is faltering

 

Over the years we’ve heard plenty of grandiose plans for businesses that never eventuate and untold numbers of excuses for not hitting the targets that were bragged about at the start of the year. As accountants, we’re not really interested in all of that, what we’re interested in is the numbers because they tell great stories and they don’t lie. They’re good like that.

So with that in mind, here are our top five reasons why your business might not be hitting the mark.

  1. Business development isn’t happening. There are two main things we see happening here – either business development is always happening ‘next month’ and never actually gets done, or the business is actually quite busy so you get distracted and fail to keep the pipeline full. The current work eventually gets wrapped up and then are left with nothing to do. Morale of the story? Your business development game should always be on to keep that pipe full!
  2. Distraction. Entrepreneurs like things that are new and challenging and that is great. Where this becomes less great is when the business is just starting to do okay and the owner gets distracted by a shiny new opportunity, typically unrelated to the core business, and allows the existing business to fall over because they took their eye off the ball. Focus is paramount, don’t allow yourself to get distracted by something new until the something old is working brilliantly.
  3. Unprofitable customers or products. Do you know which of your customers or products generate the most profit for your business? Do you know what costs are involved in selling a particular service or product? Do you have products or services that run at a loss? Without this information you simply cannot make good business decisions. Time tracking, resource tracking, job management … all of these tools can be used to achieve the goal of having the right information to make the right decisions. Look into it!
  4. High staff turnover. These days people want to blame staff turnover on generational issues, but really, if you’re losing staff it’s likely more to do with how you run the operation and less to do with what year your team were born in. Staff turnover is extremely costly to any business once you add up the costs of recruitment, administration, legal costs, training and not to mention the hit morale takes when people start walking out. Engage with your team, find out what makes them tick, find out what they want, what drives them. Without this information you’re destined to keep losing people.
  5. Poor financial management. This can take many forms – lack of visibility over the financial performance of the business, spending on unnecessary stuff, borrowing money from the business, racking up debts, etc. Setting aside legal responsibilities for company directors around this stuff, if you don’t have a clear view of the numbers in your business you cannot make effective decisions and if you don’t have solid financial systems you’re on a slippery slope to trouble town. Get some financial discipline into your business and reap long-term rewards.

There are plenty of other reasons that we see why people aren’t able to live up to the talk – failing to execute, failing to get funding, poor choice of business partner, etc. – but these five are definitely the ones we see coming up time and time again. Don’t become a story, take control over your business today by taking an honest look at the business, discuss it with someone you trust, make a plan and then execute.

 

Attribution: Numbers don’t lie: why your SME is faltering (Ben Fletcher is managing director and co-owner of Generate)