My advice to someone starting a business takes account of all the failures I have observed over the years as a practising management accountant. Running a business exposes you to new challenges and often to extreme competition. (Think of the effects of Trip Advisor/Social Media on restaurants.)
- You must be able to provide products or services to your customer that are better, cheaper, or more unique than they can get elsewhere.
- Be crystal clear as to what will attract customers to your door and how you plan to tell them about it.
- If you employ more than 4 people, make sure you have monthly accounts from the beginning. Learn to do them yourself or, better still, get a professional to provide them. If you don’t you are flying blind in a fog. You need to be aware of what cash you are generating or losing (and why) before it is too late and serious damage is done. Focus on this. A business is not a hobby.
- You can only fix the things you know about. Important indicators could be Gross profit as a %age of sales and labour cost as a %age of sales and how they trend each month.
- If you expect to bleed cash in the early stages, make sure you have enough funds in place.
- Passing the VAT threshold (£85k) and having to register is a massive financial shock to B2C business. Be prepared. (No problem if B2B).
- Use the best, most up to date tools and technology to run your business. Keep the quality of admin high but the cost low. Automation is key.
Ray Baxter www.baxterworld.com