Tag Archives: cashflow

Risky business

They say that entrepreneurs are risk-takers and it’s fair to say that, like most things in life, it takes an element of personal and/or professional risk to make things happen. This is not to say you can only succeed in business by being reckless, but being willing to get outside your comfort zone is pretty much essential. So, what are the main risks for the entrepreneur starting a new business? Here are six ‘Cs’ to consider:

Can’t do – Much of the talk these days is about a ‘can-do’ attitude – as if positive thinking is enough to make things happen! In reality, self-awareness about what you can’t do is probably more important – so that you can work out how to overcome your shortcomings eg filling skills gaps by training or co-opting someone else.

Competition – With a new business one of the first considerations should be the competition (direct = others doing something similar, indirect = everything that’s going to stop your would-be customers buying your product or service). If there’s no competition, you might ask yourself why not, if there’s loads of competition you need to know why people should choose you. A serious assessment of the competition can reduce the risk of failure – try to learn from other people’s mistakes. That said, I’m a firm believer that you can gain more from cooperation/collaboration than competition.

Cash (flow) – The single biggest reason that businesses fail is running out of cash. There may be lots of money tied up in the business but none available in a liquid form – cash – to cover immediate costs such as salaries and daily expenses. Not for nothing do people like me repeat the quote Turnover is vanity, profit is sanity, but cash is reality.” Keeping a close eye on the money coming in and going out of your business bank account – your cashflow – will reduce the nasty surprises.

Capacity – So your start-up is doing well and you want/ need to grow; the biggest limiting factors at this stage are time and space. You only have so many hours in the day and, if your business involves face-to-face customer services, you’ll need to be looking for people to bring in to help out (in effect, to increase the hours in the day). You may also need more space to accommodate the extra people knocking at your door. If you’re selling products, you’ll likely need extra space for production, storing stock and materials, and maybe for increased packing and distribution.

Contingency – They say that the best business people are not so bright that they keep asking ‘what if?’ all the time. But, it would be bright to do at least some contingency planning around you and your business along the lines of … What if I’m off sick for 4 weeks?  What if my mobile phone or laptop was stolen? What if a massive order comes in next week?

Coordination – Business seems so easy when you see it in terms of ‘selling the right products/services to the right people at the right price’ (whatever we mean by ‘right’). But the problems arise because real life rarely provides an easy route from A to B. Coordination – having a realistic map of your route to a clearly defined destination, and systems for coping if/when things go wrong (breakdown recovery etc), will help make the ride less bumpy.

Ultimately, the best entrepreneurs manage risk rather than letting it stifle progress – they take risks when they can afford to fail. David Robinson, former Chief Officer of Community Links in East London, makes the case for risk-taking. “If we don’t fail it means we’re not taking risks. If we’re not taking risks it means we’re not trying to do things differently, and if we’re not trying to do things differently, why are we here?”

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Enterprise essential – Manage your cashflow

‘Turnover is vanity, profit is sanity, cash is reality’. It’s no good having a smart office and a warehouse full of products if you can’t pay your staff at the end of the month. Control your cashflow by maximising income (while not compromising your social purpose) and chasing debts. Control costs (easier when they are variable rather than fixed) but think strategically – a short term gain may be a long term loss.