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
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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! Be sure to check as they make very interesting reading. If you'd like to take part scan the QR code on the right.
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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 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.
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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.
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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.
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FBM Summer 2019
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FBM Spring 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
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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?
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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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