Key Strategies to Avoid Becoming One of Those Failure Statistics
80% of businesses fail in the first couple of years and beyond three to five years, statistics become worse. But the good news is that over 90% of Self Made Millionaires do so through their own business. There are risks in starting your own business that at some point either you will lose confidence or you come out strong to have your business up and running.
It is not the smartest person in the room that gets to have a successful business but it is someone who is disciplined enough to spend less than what they earn, someone who creates effective key strategies in place and grows their business to be successful and achieve their goal. Annette will discuss all the key strategies for business owners to avoid becoming one of those Failure Statistics.
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Over 80% of businesses fail in the first couple of years and beyond three to five years, the statistics are even worse. But the good news is that over 90% of Self Made Millionaires do so through their own business. So whilst there is the risk of failure, and it is a very real risk, there can also potentially be huge upside. And it's important to remember that it's not the smartest person in the room that gets the financially successful business.
But it is those that learn key strategies to have a healthy business, someone who is disciplined enough to spend less than what they earn and if they want to spend more, understand that means they need to earn more. And someone who puts key strategies in place around how they spend, save and grow their business to be successful and achieve their goals. Because typically it's the same old things that cause businesses to fail.
In today's episode, I want to go through those things and arm you with some key strategies to avoid becoming one of those failure statistics. I am Annette Ferguson, CEO of Annette and Co, a UK based accounting firm. I'm also a chartered accountant, certified Profit First professional and growth consultant for small business. And if you are really serious about finding that financial and lifestyle freedom, then I want you to just briefly pause this episode, and head to annetteandco.co.uk/want-our-emails.
The link will also be in the show notes. In doing that, you will receive details of all the workshops that we hold around increasing profitability and having more freedom from your business, as well as receiving our Friday financial Freedom Finder Newsletter. So that's annetteandco.co.uk/want-our-emails. Like I say the link will be in the show notes.
Why is it non-negotiable to have a true cash management strategy in place for your business?
Now many times what causes business failure is actually running out of cash. And that is because few businesses have a true cash management strategy in place. Many businesses have a transaction management strategy, so using XERO or QuickBooks to keep track of their business financials, but typically, many lack a cash management strategy, actually managing how the cash moves in and out of your business.
So if you want to get a handle on cash management, the big thing that I would recommend is reading Profit First by Mike Michalowicz. That is absolutely your starting point. You can get a PDF of that book by heading to annetteandco.co.uk/pfbook.
Again, the show notes will have the link in it for that or of course, you can buy that from any good book retailer. But that for me is absolutely the first step in ensuring the longevity of your business is to get a robust cash management strategy in place. And in reality, that should be a non negotiable for all businesses, regardless of their size.
What does putting all your eggs in one basket mean and why is it dangerous?
Now, other reasons that cause business failure are things like relying on one or very few primary customers, one source of income, or one key salesperson, usually the business owner, or perhaps over reliance on one social media channel or advertising mechanism. But the thing is, that putting all your eggs in one basket is dangerous, and unfortunately can put you out of business overnight.
If you rely on very few or one primary customer, what if their strategy changes and you're not part of that. All of a sudden your business collapses overnight. If you focus on only one source of income, whilst that is important in the early days of business, so that you can get traction. If you continue on that path, it can leave you vulnerable. Let's say there is a change in legislation or how people buy and they no longer want to go down that route with you. And if you're focused on one key salesperson, for example, which like I mentioned, can often be yourself when you're running a business, what happens if you get sick or other things get in the way and cause sales to drop as a result?
In business change is the only constant and that, therefore means as a business owner, we always need to be looking for ways forward, we need to be planning and plotting different strategies to protect ourselves, our families and our business. Like I said, all our eggs in one basket is dangerous. And that means that diversity and sustainability is key. Without these things, as a business owner, we can end up exhausted, burn out.
What are the questions business owners need to ask themselves on a daily basis?
And sometimes unfortunately, if we don't cover off the first thing, cash management, racking up a ton of debt in the process. Lack of scrutiny over our business's weak spots, leaves us in a highly vulnerable position as a business. So ask yourself, what would my income and profit look like if my biggest customer went away tomorrow? In my industry, we actually have to disclose to our regulator, if we have one client that makes up more than 25% of our income, because they know that it becomes a key vulnerability in our business. So is that the case for your business? And if so, what would happen if they went away tomorrow?
Ask yourself if myself or my main sales person, if you have one was unable to produce perhaps through illness or some other reason, how would my business move forward. Would I have enough clients coming in each month to sustain my growth? Ask yourself, if the algorithms changed on my main social platform, or let's say you got hacked and got locked out? How would you adapt? How would you then get clients? For me, the exact thing happened to us, we had our Facebook account hacked, we had my page and my profile hacked. And we basically lost a huge amount of audience because of that hacking and is still causing us problems now.
Even though I was in a position where I was producing content and interacting on other social platforms, it did still impact our business. And these are the types of questions that business owners with longevity ask themselves on a daily basis. So let's arm you with these right questions and strategies to put yourself on the right side of the statistics. Yes, this stuff is hard work, but this determines the fate of your business and ultimately your life. And no one ever said it was going to be easy. This is what financial and lifestyle freedom is all about, asking yourselves the hard questions, not just when things are challenging, but when things are going well. And it will help you build a strong foundation and a strong business.
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Thank you so much for tuning in today. I hope you got lots of value from this episode. Now if you're struggling with any accounting things for your business, I'd love to help. Make sure you reach out to me at podcast at annette and co dot co dot uk, that's email@example.com and let me know how I can help. Of course, remember to subscribe to this podcast as well. Thanks again.