“86.8% of all Canadian startups make it to year 2” [source]
How many times have we heard something like that? I’d like to see a statistic on how many hours of sleep new business owners lose.
These kinds of things can be disheartening, but I’m here to tell you that most of the causes behind these business failures are avoidable.
This article in the Globe & Mail lists 8 reasons your new business might be failing. More than half of those reasons could be mitigated through better financial management.
Most new business owners are great technicians, meaning they are good at what they do–landscaping, baking, welding–but they don’t have experience running a business.
The business owners that succeed understand their strengths and weaknesses and get help to fill in the gaps.
We all need to bootstrap to some degree in the beginning, but knowing when it’s time to get help is a key differentiator between those that succeed and those that fail.
Here are 4 ways the right financial partner can help you get and stay profitable:
1. Financial data
If you have your books in order and up-to-date, you have the financial data you need to make better business decisions. You can evaluate, forecast, and plan in a way that is impossible when you don’t know your numbers.
2. Cost management
It’s easy for costs to get out of control. Staying on top of your expenses, whether that’s procurement, inventory management, or accounts payable, this is a critical part of your overall cash flow management.
3. Cash flow
Speaking of cash flow…this is probably the most critical and least understood aspect of good financial management.
Your bank account balance is not an accurate reflection of your cash flow.
If your books are up-to-date, you will know your true cash flow position and adjust your actions accordingly. If you don’t manage your cash flow well, the results can be terminal for your business. Everything from negative impacts to your credit rating to losing staff because you can’t pay them on time.
4. Receivables
It’s amazing how quickly you will forget to issue an invoice or collect on an invoice if you run everything out of a shoe box in your truck.
Make sure your receivables are accurate: know who owes you money and have a system for follow-up and collection.
Is it time to get help from a financial professional?
It’s definitely something to think about. The right financial partner will help you go from a reactive, “oh sh$t!” business owner to a confident, proactive CEO.
Need help finding ways to make your money go further? Our Small Business Bookkeeping Audit is for you.
We take a deep dive into your figures to identify how you can tighten your business belt and boost your profitability.
Although this blog offers business advice, this content is for general informational purposes only—it is not intended to replace the guidance of a licensed legal or financial professional. Information created by third parties that we may link out to or feature on our site is not endorsed by us and remains the responsibility of such third parties. The Rayne Firm assumes no responsibility for errors or omissions in the content.