They say an alternative definition of success is the avoidance of failure and I regularly come across new ventures or start-up companies that are spending time and resources correcting past mistakes that are now holding them back.
In my opinion and based on experience that I see within client businesses and prospects, there are 5 topics and activities that should be implemented early within a business’s life cycle to avoid the pitfalls and mistakes made by others.
1. Implement Good Cashflow Forecasting
There are only 3 reasons why business fail: cash, cash and cash. Understanding how much you have, where it is going and where it comes from is paramount and the best solution is the implementation of a cash forecast. Depending upon the type of business it would generally be at least a weekly cycle, forecasting out to as much as two years. Highlighting any deficiency and understanding how long it can take to acquire any funding gap is paramount to a business’s success.
2. Have a Business Plan
There is an old Sioux proverb, “If you don’t know where you are going, any path will do.” Having an updated business or strategic plan is a pre-requisite for providing focus, goals and understanding. Planning is a whole topic itself however there are 4 key points a good plan should have:
- A clear understanding of the destination.
- What that destination means in monetary terms.
- Clear strategic steps or actions that are needed to achieve goals.
- Who is responsible for those steps or actions.
3. Hire the Right People
Hiring the right people is one of the most difficult tasks to get right and extremely costly when it goes wrong. I regularly come across businesses where friends and family have been hired, and it has led to many toxic, sometimes irretrievable, situations further down the line. Be clear about the skill sets you need to progress and hire those, whether they be contract, external and not just full-time. There are now many different options out there to fill your skills gap.
4. Know your Numbers
When your Accountant files your accounts at Companies House some of that information is 21 months old. It is not uncommon for many large mature organisations to have poor, late management information, and for a start-ups and early cycle businesses it is crucial to understand what is happening now and the immediate future. It is not just about the P&L and Balance Sheet; it includes having good Key Performance and Key Lead Indicators to understand and control what is really driving value within your business.
5. Understand Your Customers
Customers are king and don’t they just know it. Understanding your customer base, the value that you or your products provide, and the problems solved are key to customer success. Other considerations are:
- Clearly understanding your sales process.
- Understanding customer profitability.
- It does not always have to be perfect to add value to your customer.
Big buildings are built on solid foundations, and business is no different. If you have the right disciplines and pursue the right activities early on it will save a lot of stress, resources and effort later.