Fluid Business Magazine - Summer 2019

FLUID BUSINESS THE MAGAZINE FOR BUSINESS OWNERS Summer 2019

MONEY TALKS THE GROWTH TRIANGLE

KNOW YOUR NUMBERS

FUTURE FINANCES

HOW BUSINESS GROWTH, CASHFLOW & PROFIT ARE LINKED

WHY GETTING A GRIP ON YOUR DATA IS VITAL TO SUCCESS

WHAT ARE YOU DOING WITH THE MONEY YOU MAKE

Learn.fluidbusiness.co.uk Make your ideal business a reality with our online learning programs

MONEY TALKS 04 05

15

The Fluid Book Club

Know Your Numbers

Literary inspiration from the Fluid Business

Get to grips with the financial basics to boost

Coaches

your business success

18

Coaches Q&A The coaches share their expert knowledge by

Book Review Make sure you've read Simple Numbers

answering our question of the issue!

06

19

The Growth Triangle Understand the relationship between

Future Finances What are you doing with the money you make?

Business Growth, Cashflow and Profit

07

21

Money - A Key Business Driver Are you on top of your finances?

11

Three steps to make your idea work

23

Marketing - A Cost or An Investment?

Is marketing a worthwhile use of your budget?

13

Make Your Idea A Success Surprising Stats A fun look at business related numbers

Business Modelling For Profit Three components to include in your business model

Welcome from...

NATALIE HARIRAM Managing Director, Fluid Business Group

We've been conducting a survey to find out what business owners really think the impact of Brexit has been so far and will continue to be. The results will be shared via our blog soon!

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To follow the blog visit fluidbusiness.co.uk/blog and subscribe to ensure you never miss an update.

Just the mention of a balance sheet can send many business owners heading for the hills but getting to grips with your financial data can have a hugely positive impact on the success of your business. Find out more on P.15

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FBM Summer 2019

The Fluid Business Book Club Looking for some literary inspiration?

This issues top picks from the coaches

Ray

One Minute Manager Meets The Monkey Ken Blanchard

Andy

Who Moved My Cheese Spencer Johnson

Peter

Instant Cashflow Brad Sugars

From the series of easy to read

Cheese is a metaphor for your

A quick fix guide on how to

books, this one looks at how to

goals. This books helps you look

improve your cashflow.

effectively manage your team.

at things differently in order to

A highly recommended read from

meet those goals.

a dynamic author.

Polar Bear Pirates Adrian Webster

S.U.M.O Paul McGee

Screw It, Let's Do It Sir Richard Branson

Just a big kid at heart? This is a

A humorous book with practical tips

Fascinating insight into how Richard

solid read for both personal and

to help you tackle adverse situations

Branson thinks and his approach to

professional development.

and succeed in business.

life and business.

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FBM Summer 2019

Coaches Q&A What's the best indicator of a businesses financial health?

Ray Moore - Founder & Managing Coach Understand how your business generates profits!

Build the financial model of your business so that you can convert your drive, hard work and gut decisions into profits.

Without that model growth may not produce the profits envisaged as unexpected changes in customer or product mix puts the business profits and cash flow under pressure as the business lurches out of balance.

Monitor your key metrics from that financial model to ensure you keep your finger on the pulse.

Peter Boolkah - Business Coach Forward looking leading KPI's are the best way to go. biggest

problems

entrepreneurs

make

is

that

they

One of the

measure

their

business based on historic data such as monthly accounts if they are lucky. The challenge with that is that they are historic and cannot be influenced.

Choose a set of KPI's that give you real-time information that you can influence daily to give you the desired financial results.

Andy Sleet - Business Coach I think the old adage of Turnover is vanity, Profit is sanity but Cash is king comes to mind here.

Many people judge their business on the

amount of money that comes in, which can sound impressive but doesn't tell you what you're making. Next we can measure profit, which

is

a

businesses

much get

better

into

indicator,

trouble

and

go

however bust

I

have

even

seen

though

so

they

many had

a

'profitable' business. The real indicator therefore has to be cashflow; getting an understanding of this subject will help predict the future performance financially.

of

the

business

and

allow

time

05 |

to

run

it

properly

FBM Summer 2019

The Growth Triangle Business Growth, Cashflow and Profit

Most business owners understand the importance

What started as profit doesn’t come out of the

of

balance sheet as cash, which restricts how much

cashflow

but,

often

without

realising,

businesses can build a cash gap. This is the time

we can put back into growth.

between when a business makes purchases (pays cash out) to the date the cash is received in from

Cash

flow

may

be

used

to

purchase

new

customers and debtors.

machinery or vehicles, so there is even less cash to put into business growth. However, the amount we

It’s important for small businesses to recognise the

do invest into growth then starts to produce more

potential impact this could have. Business owners

costs in the form of overheads, therefore it doesn’t

don’t want to arrive in a situation where they need

produce the same amount of profit as before.

to cover the difference, through factoring or bank financing.

This is why business owners often say they made more profit when they were smaller and why many

The Growth Triangle can be used to understand

settle on their business being a smaller size.

the power of cash flow and its impact on business growth.

An important step in preparing for business growth is to ‘Set out the Stall’ and look at each of the

At its most basic, the model presents the idea that business growth produces more profits for the business, which gives a healthy cash flow which can be reinvested in growth.

filters

in

the

Growth

Triangle

so

that

growth

doesn’t drag in more cash without making a profit.

Ensure your return on investment calculations are

But is this really the case?

correct and identify the assets that create growth

The second part of the model shows other areas

and profitability, whether people or machinery.

that

influence

the

Growth

Triangle.

In

a

more

realistic light, profits in the business can become

By doing this, you can efficiently build up a cash

caught up in the balance sheet before creating

reserve and be prepared for the extra amount of

cash

cash you’ll need for business growth. You’ll also

flow.

extended

This

credit

could or

be

we

debtors for payment.

06|

FBM Summer 2019

because

haven’t

we’ve

chased

given

up

our

have the awareness of which investments are the most important to your business model in order to produce the best return on your investment.

Money - A Key Business Driver

By Ray Moore Taken from 'Can Your Business Step Up To The Growth Challenge'

It’s the lifeblood of any enterprise and one I’m sure

Building long-term sustainable cash flow is one

you feel you have the greatest understanding of –

of the vital ingredients in taking your business

money. You’ve seen your business make a healthy

up the Levels. To achieve this, you must invest in

profit

proper financial information and all the elements

last

year

so,

of

course,

you

know

what’s

going on, where the money is going and where it’s

of your business that will enable you to adapt

coming from, right?

when it needs to.

Well, it would be great if this was actually the

There’s that word again – investment – and I

case, but incredibly this is an area in which many

can

business owners just don’t have their fingers on

calculate what it’s going to cost you! Well, let me

the pulse. Many have no system of producing or

answer that. What it will cost is probably a bit of

analysing monthly accounts and the health of the

a dip in profits to begin with but what it will bring

business is largely judged by the current bank

is long-term sustainable wealth. Remember, you

balance or level of surplus.

have

imagine

to

set

once

out

the

again

stall

you’re

before

trying

you

enter

to

a

period of growth so the expenditure has to be We know already that maintaining a surplus

made up front. The return on that investment will

alone is not enough to keep the money aspect

come

of your business in balance. During a period of

barrier.

when

you

break

through

that

Level

3

growth, it can too easily be consumed.

Frankly, it’s a lack of cash flow (not profits) that can kill a business. (continued over)

r u o y k c Che w o l f h s ca FBM Summer 2019

07

So,

we’ve

already

talked

about

developing

I’ve deliberately kept these two examples quite

your team and skills, an investment that will

vague; from within the pages of this book I

make your business more aware and able to

cannot honestly tell you where to place the

deal with all the opportunities that come your

focus of your investment.

way. Your team is surely your biggest asset but let’s look at what else you need to be thinking

That

of

factors about your business – from how old

–

your

physical

machinery

and

assets

such

infrastructure

as

as

property,

well

as

will

depend

on

all

kinds

of

individual

the

your machinery is to your current attitude to

less tangible assets such as your brand and

the use of social media. What I can tell you is

marketing.

that

you

cannot

take

your

business

up

the

Levels by focusing only on your own earned Let’s look at two examples.

monthly income.

Firstly, to enable you to switch from focusing on the short term (the here and now of the

Learning

bank balance) to a more long-term financial

investment rather than simply a cost is what

focus

will enable your business to achieve a passive

likely

(sustainable to

need

information mean

to

you

boosting

financial

cash

flow),

improve

have

are

the

financial

available.

your

team

or

training

expert

on

you

by

That

very

might

employing

up

an

income

to

that

see

all

secures

expenditure

everyone’s

as

an

future

and

keeps the cash flow… well, flowing!

a

existing

employee but it will almost definitely need an investment in infrastructure too, perhaps involving a whole new IT system to produce the

I want you to take on another task, Stop and Review Your Current Assets.

Don’t forget this is not just about pieces of equipment.

reports you need. It may seem like a big cost, but think about it. If the result is that you now

You need to look at things like your company

have detailed information that allows you to

logo, website, security systems and much more

make the best financial decisions, then that

–

investment will soon prove worthwhile.

achieving

basically a

anything

that

commercial

is

involved

outcome

for

in

your

business.

Let’s now imagine you are setting out a path towards

growth

that

involves

quite

a

Once you’ve conducted this kind of inventory,

significant expansion of your current product

select up to ten items and make an honest

range. How do you go about this? Is it a case

assessment of whether each of those assets is

of finding a bunch of similar products, placing

fit for purpose now and can help take you into

large orders and cracking on with the sales?

a period of growth. Use a scoring system such

That would be the absolute opposite of setting

as 0 for ‘not working at all’ up to 5 for ‘very fit

out

for purpose’.

the

stall

and

against

everything

we’ve

looked at so far! So, to prepare properly for the introduction of a new range, you might

Then pick out maybe four or five other people

need some market research, a test phase, a

from your team and ask them to do the same.

reassessment of your brand and perhaps some

Try to pick people at various levels, covering

advertising to bring in the required custom. It

different functions within your business.

all has to be planned well in advance and in the best cases, alternative backup plans are thought through too.

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FBM Summer 2019

I’d be willing to bet a considerable amount of

It is true that you can’t always please everyone

money

each

in your team but you can keep everyone focused

person are very different. That may not be a

on the end goal and address all the issues that

great surprise. Everyone has different opinions

might be blocking that path.

and you can’t please everyone, right? Well, the

That is your key to growth.

point

that

of

recognise opinions

the

this

scores

task

now within

and

is a

you

get

what

that

business

I

want

having is

from

an

you

to

polarised issue

that

needs to be tackled.

It may be wise, at this point, to seek some external advice. As is often the case, what you see as something that has always worked and so doesn’t need changing, an outsider will be able to

If the IT manager thinks that, aside from a few

recognise as the very thing that is holding you

glitches, the IT system is great but the admin

back.

team think it’s atrocious because it takes them

another

twenty minutes to log on every morning, then

proves worthwhile in taking your business forward.

A

business

coach

investment

(of

or

time

mentor and

could

money)

be that

all is not well.

Taken from the book 'Can Your Business Step Up To The Growth Challenge'

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FBM Summer 2019

FBM FBM Summer Summer 2018 2019

06 | 10 |

Is Your Marketing A Cost Or An Investment We know that to grow our business we need to market effectively to generate new customers, however, as soon as business slows, one of the first things to go is the marketing budget!

Why is that?

So where do we start to convert our marketing budget from an expense into an investment?

The place to start is with an effective marketing plan that is built on sound market research and involves a clear understanding of who our

One of the main reasons for the marketing budget

ideal clients are for each market. Once we have

being

this

cut

tighter

is

as

soon

as

because

actually

understand

working

for

professionals,

them

money

very

few

whether or

such

as

becomes

not.

business their

a

little

owners

marketing

Unfortunately,

accountants

and

is

some

plan

in

place,

we

must

also

include

a

process for measuring each strategy that we use so that we are able to quickly measure if the tactic is working or not.

bank

managers will often tell business owners that their

Measuring market strategies always seems to be

marketing

a

is

an

expense

and

when

cash

flow

big

challenge

for

business

owners

as

they

becomes tight, they recommend that expenses are

seem to believe that doing so is very difficult, if

cut.

not

impossible.

In

all

the

years

I

have

been

teaching marketing principles, I have yet to find What if we could really understand our marketing

a strategy that cannot be measured.

strategies and be able to measure them in such a way that we knew with certainty which strategies

One

were generating excellent leads that are in turn

measure

generating profitable sales.

that all members of your team are involved with the

When our marketing budget generates profitable sales regularly, then our marketing budget stops being an expense and becomes an investment.

06Â |

FBM Summer 2018

of

the

keys

to

marketing

marketing

understand

why

being

able

strategies

is

to to

that

effectively make

they

sure

plan

and

each

of

the

11 |

FBMÂ Summer 2019

processes

fully are

important.

Very often any marketing strategy seems to be

So

a spur of the moment decision by the boss and

thousands on a strategy without knowing if it

very few other members of the team seem to

was generating any business for them or not.

even

be

aware

have

invested

On the other hand, I worked with a business

and

miss

owner who cancelled an advert they had been

measuring

running because they thought it had become

marketing is very difficult. When the team are

old and stale. Within two months their sales had

involved with the marketing plan and each of

started dropping off at an alarming rate, so we

the

put the advert back with a measuring process in

process

feeds

strategies

easier

for

the

strategy,

owners

any

which

the

business

so

measurement

of

many

becomes

belief

in

the

them

to

plan,

hit

that

it

is

considerably

understand

why

it

is

place

and

sales

started

streaming

in

again,

necessary for them to ask new prospects how

measurement showed that this advert costing

they heard about the company and to record

just

the results. One of the reasons why measuring

per month with an average margin of

new leads is very difficult for many businesses

order,

is the fact that very few even have an enquiry

investment of

£200 a

per month was generating 19 sales

return

£1140

of

of

profit

£60

against

per an

£200.

form for team members to complete, most of them just use a book or any scrap of paper

Once

lying around.

strategies being

When

building

to

in

a

use

your

powerful

marketing position

marketing

of

investment

are working and which need to be changed or

form

withdrawn. At this point your marketing budget

your

various

for

able

are

your

business, it is vital that you have an enquiry all

plan

you

measuring

wisely. At a glance you can tell which strategies

has

marketing

are

your

that

a

you

marketing

strategies on it to remind team members to ask

has

the question and to record the answer.

investment as you can measure the returns.

Once

the

front

end

measuring

process

is

in

place, we can design how we trace enquiries through the business so that we allocate and

moved

from

being

a

cost

into

being

an

If all your marketing strategies are working well and generating profitable sales, what is your marketing budget?

measure sales against each of the strategies

£500 into your marketing it

we employ. At first reading, this may seem very

Every time you invest

difficult to do in your business, but I have found

is making considerably more than this in gross

that in the majority of cases a simple solution

profit off all of those sales you are generating.

can

At this point, your marketing budget becomes

be

found

by

just

making

a

few

easy

changes to the current process you are using.

self funding as whatever you invest generates considerable return for you.

Some of you reading this may be wondering if it is really worthwhile making all these

Marketing your business successfully is one of

changes to your current sales process just to

the key points to master if you are looking to

measure the various marketing strategies you

take it to another level of success

have

in

place.

To

answer

this

question,

just

think about how much money you have invested in the many marketing strategies you have put in place over the years and then ask yourself how many of these strategies could you hand on heart say really generated profit for your business? stop and

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FBM Summer 2019

Build your understanding on how to market successfully, measure every marketing activity you engage in, keep the ones that generate profit, change or get rid of those that don’t and soon your marketing budget will become an investment that helps your business grow profitably.

Business Modelling For Profit

Three important components to include in any business model

by Ray Moore

Gross Margin

How do you compare the size of your business to other businesses?

It

is

not

unusual

for

businesses,

for

example,

project-based businesses , employment agencies or The most common response I receive is a broad

distributors to focus on the gross sales value of their

brush turnover figure (also referred to as income;

contracts of say

£4million pa.

revenue or gross sales) as an indicator of size.

However, if there are

So is turnover a good measure?

There is no way a with

high

costs

compares to a

£4

for

million turnover house builder materials

and

subcontractors

£4million turnover service company.

So what could we use as a better measure of size?

£2million of direct costs such

as materials, equipment or subcontract labour that is passed back to other companies, there is only

£2million

of

gross

margin

available

to

fund

the

business and produce a profit.

(Gross

margin

is

Turnover

less

non-labour

direct

costs).

Whereas, a

£4million

turnover service company has

negligible direct costs and therefore produces

£4

million gross margin. Twice as much.

So what could we use as a better measure of size?

Gross margin should be viewed as the true top line of

a

business

rather

than

turnover,

is

revenue

revenue

or

sales.

Gross

margin

the

available

to

the

company and a better indicator of size.

13|

FBM Summer 2019

Direct Labour

Churn

Now, viewing gross margin as the top line income

You will notice that up until now I have not really

allows us to highlight and spotlight the efficiency of

mentioned gross margin as a percentage.

the team.

The

Gross

Margin,

when

expressed

as

a

percentage, of turnover highlights the added value Let’s

have

a

further

look

at

our

house

building

of a business.

example.

Turnover

So is a high gross percentage good and a low gross percentage bad?

Well, it depends!

£m

£4million

2.0

Direct Costs

2.0

Gross Margin

A business with low margins and a short cash gap (the time between starting to spend cash until the

1.2

Direct Labour

receipt of the turnover) may well thrive whereas a business with high margins and a long cash gap

0.8

Gross Profit

may struggle.

The critical element is measuring and controlling

0.5

Overheads

that cash gap and understanding its impact.

By way of another example:

0.3

Net Profit

A manufacturing business with average margins of 60%

One

of

the

most

illuminating

and

under-utilised

that

Direct Labour Efficiency Ratio (DLER)

/

1.2

making

that

may

=

look

a

8%

1.66

little

boring

until

we

understand what it shows.

In this example, for every

gap

of

120

days

will

on

180%

from

that

working

capital

Whereas a food retailer with average margins of that has a cash gap of 7 days will churn its

cash Now

cash

investment.

=

Gross Margin / Direct Labour 2.0

a

average be able to churn its cash three times a year

ratios is

has

£1

fifty

times

a

labour

£1.66 is produced in added value.

When

most

making

400%

from

its

working capital investment.

The churn rate is,

expended on direct

year,

therefore,

a key measure and

must be understood and measured.

Often,

businesses

get

so

focused

on

increasing

their turnover; they lose sight of the working capital business

owners

and

team

members

impact.

Model

calculate the DLER they think it is not enough, which opens up discussions into how it can be improved.

We

must

understand

how

our

economic

engine

generates long term sustainable cash flow.

In my simple example, DLER would add

a 10p improvement in the

£122,000 profit!

It is so easy to overcomplicate the model.

The

three

interdependent

measures

highlighted

above will form the base of any business model.

This ratio applies to both the house builder and service company , indeed most businesses.

When the main drive is growth, it is important to be able to predict and measure the impact on gross margin and profit and cash requirements.

Now

we

have

comparison

a

simple

between

calculation

that

industries,

companies,

departments, contracts and projects.

allows

Making

gross

margin

the

top

line

measure

and

modelling the mix impact on margins, churn, and labour efficiency of growth will provide an easy and effective tool for keeping the business balanced through periods of growth.

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FBM Summer 2019

Know Your Numbers

Get To Grips With The Basics

Your financial data is vital to your business success

understanding

What's the difference between a cost an investment?

the accounts? There's a lot of jargon involved in

If I spend money, it's gone forever. If I invest

business

especially

which

money,

can

off

us

business we need to treat spending money like an

What is it about finance that makes so many business

owners

be

understand

steer

around

putting, our

clear

of

accounting

but

it's

vital

finances

as

these

for

are

to the

barometer of our business.

I

hope

to

get

something

in

return.

In

investment - as if it’s going to bring us a return.

Usually the purpose of our business is to make

What are the numbers for the current position of your business?

money and if we don't understand the results

Your monthly accounts provide a view of what’s

we get, it makes life very difficult to know if

happened in your business over the past period of

we're meeting our objectives.

time. They tell you what happened but they don’t

tell you how you got there or whether you’re on

Let me give you an analogy.

track

If we can't read the numbers in business, it's a

accountants will tell us that in order to provide

bit like going on holiday somewhere and getting

accurate accounts they can’t provide them until

lost. We don't speak the language so any local

three or four weeks later as all invoices must be

people we meet can't help us, the road signs

collated and entered into the system.

use a different alphabet so we can't read these.

In

We

accounts

end

direction

up to

lost

and

turn

don't

because

know we

in

which

have

no

information on which to base our next decision.

to

order

meet

to

your

deliver

need

to

goals.

the be

We

most

often

benefit

delivered

as

find

that

monthly soon

as

possible. In an ideal world this would be no more than 3 days after month end.

In this way it's vitally important to understand the key financial data so that we can steer our

In order to better understand if you’re on the right

business in the right direction to meet our goals.

course you’ll need more regular updates than just

monthly accounts. This is where Key Performance

In

the

rest

of

this

article

we

list

the

key

Indicators (KPI’s) come in.

commercial data you’ll need to give you a good view on the financial health of your business.

15|

FBM Summer 2019

£2000

These offer an ‘in real time’ view of your business

Our profit is therefore

and therefore enable you to make tweaks to your

the balance sheet as profit - the balance sheet

plan before the end of the month reporting, giving

simply keeps track of our assets and our liabilities.

you more chance to hit your goals. Then when the

Now

monthly accounts arrive we get confirmation that

equipment and we're going to spend

we are where we predicted we would be.

We take

let's

say

£1500

that

want

of the

£2k

and this is listed on

to

purchase

your

and

£1500 in assets.

monthly accounts. Ask your accountant for help if

The

only

needed balance

Make

but

sure

you

ensure

sheet

and

you

fully

understand

really

profit

&

know

loss

way

money

£1500

on it.

profit, and purchase a

£500

car. Now the balance sheet shows

Action:

some

can

go

into

the

profit

balance

what

the

sheet is via two ways. 1) we have to make profit.

numbers

are

2) we have a capital injection, some sort of loan

telling you.

or some sort of cash.

Have you got a cash flow forecast?

Once cash is in the balance sheet, if we remove

The cash flow forecast is the one thing that tells

it, we reduce the value of the business. Even as a

us whether or not the business is going to stay

director or an owner of the business if we take

afloat. You can have a very profitable business

money out for ourselves, the profit / value of the

but if there is insufficient cash it will not be able

business has gone down. If we had

to continue long term as you will run out of money.

we

This can happen when a business sells a product,

reduced the value of the business (the balance

pays for the labour and materials but there is a

sheet)

disproportionate time between this and when they

when we want to grow a business, the only way

are paid by the client.

we can do so is by utilising the profit we have in

£1k

take

by

for

£1k.

dividends

This

is

for

really

£2k

cash and

ourselves

important

we’ve

because

the business.

What is the Profit & Loss sheet?

To use another analogy, the Profit and Loss sheet

This is where the common phrase “sales turnover is

is like knowing how fast you’re going in a boat

vanity,

and the balance sheet is like knowing how much

balance between making a profit, taking money

water is under the boat, protecting us from rocks

out for our own needs and reinvesting in order to

underneath.

grow.

The

more

water

we've

got

profit

is

sanity’

comes

from.

It’s

a

fine

underneath our boat, the more cavalier we can potentially be in how we run our business.

There's another piece to the jigsaw as well. If we

Here’s some very basic principles about the profit

need to have stock, we might use the profit to put

&

into

loss

and

balance

sheets,

example. We sell a product for that it costs we’ve spent

£3000

using

£5000.

a

simple

the

stock

we

purchase.

So

part

of

the

We know

balance sheet includes the stuff that we have,

to produce the product (so

which we've paid for but we haven't sold yet. That

£3k out of the business).

drives some challenges in the business if we have lots of money tied up in working capital (stock) and

we

need

real

cash

in

order

to

grow

the

business further.

16|

FBM Summer 2019

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Want to get a grip on your business finances?

This might be the best book you can read

This is a book we often recommend to clients

What we say

who

of

One of the things we like best about this book is

can

that it perfectly complements the theories found in

need

finances

to

in

develop

their

an

business

understanding

and

how

they

impact profitability.

The Levels series of books by Ray Moore. Whilst some of the references are American they are easy

What the blurb says Simple

Numbers

can

business profitability.

to understand and still apply in principle in the UK. guide

you

to

increased

Take the mystery out of

Based on the premise that accountants often make

small business finance with this no-frills guide to

finance

unnecessarily

understanding the numbers that will guide your

small business owners see beyond the numbers. It

business out of any financial black hole. Author

shows

Greg Crabtree, a successful accountant, small

indicators as a basis for smart business decisions.

the

reader

confusing,

how

to

this

use

book

key

helps

financial

business advisor, and popular presenter, shows you

how

to

indicators

as

use a

your basis

firm's for

key

financial

One of the key reasons we like this book is that it's

smart

business

not

overloaded

focus

calculations

$5 million (and, more ) in annual revenue.

surrounding how to make your financial decisions. are

on

the

accounting

jargon.

decisions

is

or

decisions as you grow your firm from startup to

These

The

with

only

thought

partly

process

about

the

Jargon free, and presented in an easy-to-follow,

mathematical equation - how you view money and

step-by-step format, with plenty of real-world

your mindset have a significant impact. Failure to

examples, Crabtree's down-to-earth discussion

understand

highlights

business success.

the

committed

by

most small

common

financial

businesses,

avoid them.

and

errors

how

to

this

can

negatively

impact

your

Want more?

Series 14 of our podcast is available now.

We're reviewing our favourite business books, including this one.

Tune in and understand how they can help you grow your

18|

FBMÂ Summer 2019

business.

fluidbusiness.co.uk/podcast

Future Finances What are you doing with the money you make?

by Andy Sleet

If you're like most business owners I meet I guess

This poses the question, 'What is the purpose of your

you probably 'fell' into business for one of a various

business?' If we do a 'Google' search on this subject

few reasons such as:-

we

find

many

experts

all

with

differing

views,

however I believe that one of the major purposes is

Got made redundant

to give the owner the life that they want.

Too many business owners adapt their lifestyle to fit

Got fed up with making money for others so

in

decided to go alone

with

what

the

business

needs

rather

than

designing the business to fit in with their personal needs.

Decided you were unemployable

Now

having

spoken

to

100's

of

business

owners on the subject of their 'ideal' life there are many answers that seem to crop up over and over

Couldn't get a job so decided to start up a

again such as:-

business to earn some cash

Now, whatever the reason you got started generally the

goal

at

the

beginning

seems

to

be

to

To have more time with my family

start

making some money as quickly as possible so we

To have material objects

can start paying the bills.

To give back to others in the way of charity As time goes on however we generally find that our business owners have a few pounds in the bank and

To help the team that got me to where I am

are enjoying a reasonable life style but have not really sat back and thought about where they really

To go on more holidays

want to end up.

To become financially secure

19|

FBM Summer 2019

Rarely is the answer to spend more time in their business. From this we should all take some time out from the hustle and bustle of the day to day, get off

if we always do what we always did then nothing's going to change, right?

Well this is where the education comes in,

the hamster wheel, and reflect on what our ideal life would be.

Let's

look

at

other

business

owners

that

have

achieved it and see if we can figure out how they I generally ask the following question......

operate differently; there are plenty of successful people that have written autobiographies of what

'If you had £50M in your own personal bank account right now and every time you took some out it magically filled up again, what would you do with your time?'

they've done and how they've done it.

Now I'm not suggesting for one minute that it's as easy as reading their book and just doing stuff as it's not the knowledge they have that on its own makes

Take a moment to reflect on this, what is your answer to this question?

the

difference

it's

more

about

the

understanding they have around their knowledge that is all important.

(For more info on this may I suggest you read the following book. The Levels, Can you step up to the growth challenge? By Ray Moore) Armed with this answer we should calculate how much money and time we would actually need to do that.

What I hope you gain from this is that it is possible to build such an entity, once we accept that it's possible it's just a matter of finding out how!

Generally the answer comes out to a lot less than

£50M.

Once we know how we want to spend the

rest of our lives and how much time and money we need to fund it we should set about designing our future business to enable it to happen.

Here's where we come to the point of the title of this piece 'What are you doing with the money you make?'

The profits from your company should now be invested in getting the company to the place that it needs to be.

For most people it appears that financial security is the main driver for them, regular income without the need for being at the workplace, although to most this is perceived as an unattainable dream.

20|

FBM Summer 2019

As part of my journey to understanding what to do with

the

money

and

becoming

financially

independent I found the book - Rich Dad, Poor Dad

by Robert Kyosaki

He explains very eloquently the difference between assets and liabilities. If we understand this then we have the basis to understand how we should invest the money that we earn to get us to a place of financial independence!

Three Steps To Make Your Business Idea A Success

by Ray Moore

Before you invest in a new business idea read our

1. The Idea

article in order to maximise your potential to make a meaningful profit.

Well let’s start with the obvious.

How good is the idea?

What’s

the

difference

between

ventures

that

commercially fly and those that barely get off the

Not just to you but to your target market, so do your

ground?

research and understand what is needed. Don’t rely on friends and relations to give you feedback on

I’m sure like me you will have had successes and

the idea as they are not going to be impartial.

also some failures over the years. At the end of the

You need to know right up front that your idea is

day nothing in this life is for certain and business is

not just good, it’s GREAT from the customers point

a risk.

of view.

So

here

are

the

three

fundamental

keys

I

have

Now I’m sure you have had some great ideas in the

found that differentiate success from failure when

past that have not seen the light of day so the next

starting a new venture.

step is to have…

21|

FBM Summer 2019

2. Confidence

The one thing I have found over the years is that for success all three of these keys have to be in place

How confident are you about this great idea?

It may be a great idea but are you prepared to put

in the right proportion.

your money where your mouth is?

I have seen great ideas never get off the ground Financial investors want to see commitment to an

through lack of confidence.

idea. Why, because they want to be confident in I

your confidence!

have

seen

confidence

in

a

great

idea

just

evaporate at the first hurdle.

Think about programmes like Dragon’s Den and how often the dragons run for the hills when they learn the person in front of them has equity but is not prepared

to

put

it

at

risk.

It

shows

a

lack

I have seen blind confidence and boundless energy being wasted on poor ideas.

of Hopefully you get my drift as it will always be one or

confidence.

At the end of the day if you do not have the true confidence to back your own idea, not just hot air,

more of these elements that are not in balance in every failed project.

then perhaps the idea is not so great!

With all three in balance i.e. a great idea backed by confidence and the appropriate level of activity

And then lastly

you are on route to success.

3. Activity

I’m sure you will have your own war stories of those

This is the doing bit.

What are you prepared to do to make your idea a

great ideas that have not seen the light of day.

reality?

This is where the talking and hot air stops. It may take

massive

activity

over

a

long

period

so

be

prepared for the long haul.

Perhaps now is a good time to run the three key test on any ventures you have started recently or that have not yet yielded success and see which may be out of balance.

Are you going to fall at the first hurdle or are you prepared to do what it takes to get heard?

22|

FBMÂ Summer 2019

Surprising Stats A fun look at numbers in business

15%

34%

The percentage of payments in the UK that were made in cash in 2017

£100,000+

Amount SME's spend annually on recruitment fees (Consult Inhouse)

32.2% Proportion of the UK's energy generated from wind on 28.11.18 A record amount

The amount of small firms that make a record of assets protected by copyright

36%

£4,366

The average annual cost to a small business for electricity & gas, according to uSwitch

37%

Number of SME's using external finance, according to the British Business Bank

Number of homepreneurs who are lonely (Barclays)

4.6

The amount of TWh generated by solar in Q2 2018

23 |

Source: FSB First Voice Magazine April 2019

80%

The amount by which the UK is obligated by law to cut its carbon emissions by 2050, compared to 1990 levels

FBM Summer 2019

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