I bear the scars of having seen my Dad steadily (miserably and slowly) go bankrupt, losing everything, because he failed to sense check his way forward. At the time I didn’t see it this way, but I now consider myself lucky as those scars at an early age taught me the importance of the fundamentals of a successful business.
Knowing where each cent / pence was needed, by whom, by when and how I might milk it in the meantime, has been key to accelerating profitable sales growth in my businesses.
It is all very well having a great product, a good idea and even no plan, but it’s worth nothing without financial intelligence.
What I mean by that is you must have:
If you don’t have a finance brain you must seek out somebody who does. You need to learn from them and be sure that you know which figures matter. How can you make decisions based on your KPIs (Key Performance Indicators) if you don’t know what they are and what impacts them?
Time and time again I see the misery of those with a super product, with energy and ability, fail to succeed in business because they do not do their numbers.
I personally believe that this responsibility should also be shared with any business consultant you engage with: growth accelerator, mentors and coaches of small companies. I want to see a better and more considered advisory approach for SMEs on the vital importance of companies knowing their numbers to reduce the rate of failure.
The Real Cost.
Please, don’t under-sell your product to retailers who would happily skin you alive, leaving you to bear the pain of product rejection. And don’t walk in there with rose-tinted glasses, without knowing the minimum unit price you can sell for, whilst still retaining a profit margin.
When you cost up a product, always, always factor in the cost of returns, product development and other costs that bleed profit. Detail everything you can possibly think of when calculating the cost of a product as well as a buffer for stuff ups.
Time wasting SME’s who do not take time to set up a financial plan and platform deserve to fail and often do. Often because they were too proud to ask for help or too sure of themselves and thought they knew it all.
We all can always learn from those that have run the course before us, in particular when embarking on a new venture or setting ambitious goals.
When I set out to compete in the World Triathlon Championships, I knew I needed a personal trainer with zero tolerance when I was feeling weary, to be sure I achieved my goals and who knew how to prepare me for races, to reduce the risk of injury along the way. I might have got part of the way on my own, but there was no way I would have smashed my target times in Bejing, without him.
Choosing the right advisor is critical, so ask around. There is too much good support out there to fail in this area. Business Britain don’t let your pride be your stumbling block.
Good, better and best.
Even in my own small investment group where I preach the value of making decisions based not only on good gut feel, but on the actual calculated outcomes of a good better and best scenario, I see founders getting over excited by new product development.
The thrill of new prospects and opportunities can distract from making solid decisions based on profitable, planned outcomes with sustainable, scalable potential.
Work out your margins, know what you need to sell at to be competitive and realistic.
Take building projects as an example, where they factor into the cost, the delay’s of slow moving stock and failure to sell on target. You need to have a short and long term plan that factors in best and worse case scenarios based on sector expertise.
Halve the volume you expect to sell and cost it in at double the time it takes for customers to pay you back.
Great financial management is a discipline any good business needs. It is no luxury. It is a time critical priority and requires a monthly meeting with self to review figures. Spend time ON, not in your business as a priority not an afterthought.
It goes without saying, that when budget and actual are the same, or being beaten, celebrate!
This issue of knowing your KPIs is a huge one for so many small businesses so my business partner and I have designed a short session in London to share all we’ve learnt over the years. Find out more here.
If you are struggling to see profitable sales growth or you know your sales leader needs some direction, don’t miss 26th November, 2.30pm in Central London. Tickets available here.
Lara Morgan is best known for growing Pacific Direct, from start-up to successful exit, 23 years later. She now invests her time in fast growth companies and represents UKTI as an Export Ambassador, having previously exported to 110 countries. Her vast experience and business knowledge includes specialisms in licensing luxury brands, manufacturing toiletries and selling to the hospitality environment through complex global distribution chains. She’s also an expert in leadership and developing talent having learnt through her own experiences of employing 500 employees in an open fast growth sales culture.