Category Failure

Entries 14 Total

Small Business Failure – Reason: Cash-Flow

Aug 24, ’07 11:37 AM
Author Stefan Töpfer (Editor) Categories Failure, Health Check, Outsourcing, Small Business / SOHO, Start-Up, Virtual Assistants, avoid growing pain, bootstrap, deal with taxes, do a SWOT plan, do a reality check, do bookkeeping., do credit control, grow your business, handle problems, lower overheads, not to do it!, outsource effectively, plan cash-flow, plan your business, recruit the right people, start-up in business, use online IT

The first post in this mini series is related to this issue of cash-flow and so will be many that follow. Cash-flow is the central and most critical management objective for every small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal business.

T o perform this small business health-check, ask your self the following questions:

  • Do I have a written plan and cash-flow forecast for my business? As I said before, without it it is like driving with your eyes shut.
  • Am I efficient in achieving those aims? We often allow non-core issues and irrelevant stuff to “steal” our time, or we are so overwhelmed by work that we do not have the time to stand back and look at our small business – take the time and make those decisions.
  • Do you have a feel how my small business works financially? If not, you must be feeling uncomfortable most of the time, again take the time and feel better about your small business.
  • When did I plan and monitor my cash-flow last? You need to do this at least once a week or if something happens that is not in the plan. Check your cash-flow each time before you make a bigger purchase or hire staff which is not in the plan, you will quiet easily see if you can afford to do it or not.
  • How much reserves does my business have? The best peace of mind is when your small business has substantial reserves, do you have any or are you at least planning to get a 2-3 month reserve buffer?
  • Have I re-negociated my terms with my suppliers? What if your suppliers gave you 60 or even 90 days payment terms – put that in your cash-flow and smile, it’s instant reserve. You need to pay your suppliers on time, only then will they trust you enough to give you the extra long payment terms.
  • Am I chasing my clients for payment adequately? Do you know the average number of days you clients need to pay you? Give incentives – 2 % off if you pay within 7 days – try and keep your average well below 30 days. If you have not enough time to do credit control outsource it.
  • Do I need my overdraft? If you get better payment terms fro your suppliers and do a better job at credit control, you may not need your overdraft anymore, which will save you a lot of money. Don’t cancel your overdraft, but make sure you only pay for it when and if you use it – shop around. On those terms you should get an overdraft, even if you do not need it, so if something unexpected happens you got the cash-flow reserve.

The importance of your cash-flow situation can not be overestimated, as long as you can pay your bills you are in business - as the saying goes: Cash Is King!

You can see other reasons for small business and personal business, like contractors, freelancer, self-employed, sole-trader and virtual assistants failures in my Health Check Category, if you can add to this list please do so, I would welcome your comments.

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Small Business Failure – Reason: Fixed Cost

Aug 23, ’07 9:37 PM
Author Stefan Töpfer (Editor) Categories Failure, Health Check, Outsourcing, Small Business / SOHO, Start-Up, Virtual Assistants, avoid growing pain, bootstrap, do a SWOT plan, do a reality check, do bookkeeping., do credit control, grow your business, lower overheads, not to do it!, outsource effectively, plan cash-flow, plan your business, start-up in business

I have decided to write a little mini series on why small business and personal businesses, like contractors, freelancer, self-employed, sole-trader and virtual assistants, fail and how to find out if your small business is in danger, too.

In this first part, I would like to talk about fixed costs in small business. To perform a basic small business fixed cost health check, ask yourself the following questions:

  • Do I know where all the money is going every month? You should know where all your money is going at all times – if you don not know, it is important that you find out.
  • How comfortable am I with the current level of costs? Are you able to generate reserves in your small business, or is your business just making ends meet.
  • Are large parts of the costs for non-core business tasks and do I get value for my money? No matter how well your business is doing, you should never waste money – so if you can outsource do it, it will make you small business more focused and far more resilient and efficient.
  • Do I have a cash-flow forecast for my business? Having no cash-flow plan is like driving with your eyes closed – cash-flow planning is easy, and you will have a better feeling about your small business.
  • Are there any spending issues with business partners or colleagues? Are other people spending your money (?) and you can not control them – deal with it, sort it or get rid of them even if they are partners in the business, find a way or get help.
  • Am I in control of my spending or have I abdicated this function to someone else? Even if you have staff – outsourced of employed – doing your bookkeeping and organize the payments for you, you need to make the decisions of when your suppliers get paid, so you can control your cash-flow.

There are many more questions you could ask yourself, here I just wanted to get you going. If you have any more issues or are uncomfortable with any of your costs and answers to the above questions, then you should get some professional advice.

Running out of money is the reason most small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal businesses, fail – not controlling your fixed costs is one of the main reasons for this.

You can see other reasons for small business and personal business, like contractors, freelancer, self-employed, sole-trader and virtual assistants failures in my Health Check Category, if you can add to this list please do so, I would welcome your comments.

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Small Business and Start-Up Efficiency

Aug 18, ’07 11:25 AM
Author Stefan Töpfer (Editor) Categories Development, Failure, Outsourcing, Small Business / SOHO, Start-Up, avoid growing pain, bootstrap, do a reality check, grow your business, lower overheads, market and sell, outsource effectively, plan cash-flow, plan your business, start-up in business

When I talk here on my blog about outsourcing, bootstrapping or in my company to my fellow directors about more profit, sales, customers and all that with less time, then I’m really talking about improving business efficiency.

I even often misleadingly use the word “grow”, when I really mean efficiency. I’m not one of these people who thinks, that every business wants to grow in size – no, in profit, turnover and efficiency – YES! In todays networked world it is possible to “grow” your business virtually and increase your efficiency at the same time – rather than “grow” your fixed cost structure and decrease efficiency.

Here I just want to talk about which steps one might take to a more efficient small business:

  1. look at you business critically and understand what your core business is
  2. focus on your core business and objectives, do not waste time with non-core activities – outsource those
  3. re-evaluate work processes, remove non-value-add activities, work out how to do that
  4. re-evaluate your outsourced activities, are you getting a professional and efficient service
  5. check your clients perception of your small business, ask for feedback

The drive for efficiency is an continuous effort in every business, not only small and start-up businesses, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal businesses. It is this kind of thinking that will determine success or failure of your small business venture.

How efficient is your business – to think about that is a much more fascinating way to spend some “free and quiet time”, than watching television – it’s more exciting and rewarding too.

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Why businesses fail and go bust!

Aug 2, ’07 6:59 AM
Author Stefan Töpfer (Editor) Categories Accounting, Failure, How to ..., Outsourcing, Small Business / SOHO, bootstrap, do bookkeeping.

In one word cash-flow – not because of their balance sheet or P&L – no plain and simple they run out of money. With basic cash-flow planning you can see this coming a mile of, one example.

One of the most frustrating parts about being an entrepreneur is getting clients to pay up their bills. While the government passed the Late Payment of Commercial Debts (Interest) Act 1998 to protect the rights of businesses, not many businesses actually use it.

Small business, like home-, micro-, lifestyle-, mobile-, SME-, SMB-, SOHO-businesses are losing out due to the chaos created in their cash-flow but also on precious funds that they could have charged clients for late payment.

In a recent survey by Gravdon U.K. it was revealed that as few as 4% of businesses charge interest on late payments. 44% reported adding interest to outstanding invoices and 50% did not charge any interest.

There are several reasons why small businesses choose not to charge interest and these include adding more administrative work to follow through on and losing clients.

While this trend of late payments is not expected to change anytime soon, small business need to protect their cash-flow and there are several ways to do so. To ensure that the business owners always have access to crucial information, they ned to do cash-flow planning and some bookkeeping, in order to get cash-flow plan and actual comparison.

It is not unusual that personal business, like contractor, freelancer, free-agent, self-employed and virtual assistants is owed more money than the overdraft on their bank accounts. They are effectively financing their clients business and should charge interest on money owed in excess to what their bank charges the business.

You can always outsource your bookkeeping and credit control function, use a virtual assistant and WinWeb’s On-Demand Small Business Infrastructure approach to solve this problem – you want to stay in business (?) make sure your cash-flow is good.

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