Read any small business publication or website, and you will see article after article about what a competitive world we are operating in, how only the fittest and leanest businesses will survive and that 80 percent of start ups – or some say even more – are doomed to crash and burn in their first 18 months.
While the 80, or even 85, percent figure is often quoted, there is uncertainty as to exactly where the number comes from. What is beyond doubt, however, is that the single biggest threat to a business’s survival comes down to four little letters: C-a-s-h.
Given that running out of cash is the biggest killer for small businesses, you would be amazed that so many seem desperate to throw it away, and in exactly the same ways. How many of the following is your business guilty of?
1. All the gear, no idea
Sure, this is the technology age, and you need the right hardware and software for your business’s needs. But there is a difference between right and best. Startups have a tendency to overspend on IT – having capacity to grow is one thing, wasting money of tools and features you are never going to use is quite another.
2. Shopping around
With your home insurance, you know you have to shop around every year to get the best deal. But when it comes to routine business costs, we tend to get comfortable with one supplier and can end up paying through the nose. From teabags in the kitchen to HP Print Cartridges in the deskjet, there are certain to be areas where you are spending more than you need to for absolutely no reason.
3. Not tracking expenses
Of course, you can only make the changes in number two, above, if you have a good handle on what your teabags and ink cartridges are costing in the first place. Even small expenses add up, and if they go unreported, your cash flow will start to run out of synch – and that is where the trouble starts.
Being prepared for growth is great. But anticipating it too soon can be fatal. Some businesses dive in at the deep end with a manager to take care of every function, when the turnover of the business really can’t support it. Part of being a business owner means rolling up your sleeves and getting your hands dirty, particularly at the early stages. That’s not to say you have to do everything alone, but it does mean taking a pragmatic view and asking some people to wear multiple hats.
Outsourcing makes sense for so many tasks. But businesses find it incredibly difficult to get the approach right, and have a tendency to either keep everything in-house or to overdo the outsourcing, only to find themselves with little control and too much spending. Finding the perfect balance is a topic in itself, and is one that every business needs to take time getting right.