Swim or Sink!
A recent survey by Barclays Bank confirmed that 4 out of 10 new enterprises (i.e. a staggering 40%) launched in the eight years to 2004 failed within two yeas. Even many of those that survive end up stuck in the mire of marginal profitability and constant cash flow crises. Lack of financial planning is not innocent to this failure.
What are the factors that obstruct business development? The common feature underlying most new enterprises is lack of information.
Information is the one ingredient that enables businesses to make decisions to solve problems and take advantage of favourable opportunities. This process is called financial planning. Please click here to read more on the importance of effective, fast and easy decision making as a vital tool for success in business.
So, it's all comes down to accounting in the end. Please click here if you want to know everything about the need to keep records to grow your business.
There is a misconception that the need for financial planning is essential only for large businesses and that small businesses do not need to use financial planning in order to make the RIGHT decisions and succeed in their goals. To look at some examples how vitally important financial planning is in real life, click here.
As a matter of fact, the need for financial planning might be greater for smaller businesses as it is a widely known statistical fact that a substantial percentage of new businesses never make it into their second year (see first paragraph).
Large businesses have already realised that need and have specialised personnel who perform this function of providing management information for decision-making on a full time basis.
Nevertheless, it is understandable that a lot of SMALLER BUSINESSES may not have the necessary resources for appointing permanent staff to perform this vital function. When a business starts up, it frequently consists of a MAN and his great IDEA! Gradually, the idea is exploited and takes the shape of increasing sales. As the business keeps expanding it hires more personnel as it is impossible for the founder to continue doing everything by himself.
So, at least at the initial stages, when financial planning is most needed, how many small business owners do you think have the required fundamental understanding of accounting, either educational or practical to enable them focus effectively on the bigger picture?
The lack of knowledge has nothing to do with intelligence. A business owner is not an accountant. A business owner runs the show and calls the shots. A second opinion should be desirable especially when it comes from an impartial and specialist expert. Therefore, it will be an extremely smart move to use some outside help.
In addition to the lack of specialised personnel, TIME is another constraint that restricts and prevents some business owners from preparing the necessary information in a regular, accurate and understandable form that will support their decision making.
Although some business owners might even have university qualifications in finance, it's very difficult to concentrate on strategy and long-term business development whilst being central to all major business processes (including generating and retaining new business, actually providing the service, interviewing new staff and dealing with suppliers find the time when being involved in the day-to-day running of the business.
Lack of time is no excuse for not having the required information to enable sound business decisions to be made.
Think about the limitations and risks of not being able to make sound, fast and easy business decisions in a competitive and forever changing world:
If no efficient and faster decisions are taken in a systematic and methodical manner on the basis of suitable information, the business will rely to a large degree on luck for its continuing existence and development.
It's like steering the ship without a compass, blindly. How far can it go like that?
Please feel free to use all the information that you will find on the web site.
If you have questions, please feel free to contact me personally at any time. You can call, e-mail, fax or write to me and I will be happy to answer any and all of your questions.
Good luck in your business ventures!
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