And while that is a fantastic place to be, if you’re one those people just starting out then there is a single piece of advice that you must heed – don’t ignore the boring stuff, as it could quickly become your downfall.
As a business turnaround specialist, I spend my time meeting with the directors of SME businesses, typically within the range of £500k - £5m and also some that are much bigger. Often these businesses were start-ups, originally set-up by young entrepreneurs, or the ex-directors of larger firm who have decided that they want to do their own thing.
In both cases, the individuals involved are often driven by a business, product or service idea and are usually very focused and good at both developing their product, and taking it to market.
Where they can fall down tends to be that their plans are usually centred on ‘the product’ and they show little awareness of (and in some cases no interest in) fiduciary responsibilities – those issues that are required, mostly by law, of company directors. In essence, those issues that if dealt with properly should ensure a solid operational foundation for a business.
It is easy to become caught up in the excitement and in getting the ‘day job’ done, to the detriment of the financial, reporting and compliance responsibilities that you face as a director.
For business owners coming from bigger organisations, these are things that they may be used to others dealing with, even if they have been on the board. And if they are new to management, or young and inexperienced, then they simply may not have the experience or awareness. In addition, business and financial planning is often 'surface level' only.
Difficulties can also arise when there is more than one shareholder/director, and where individual responsibilities can be a little woolly, and aims and expectations are different.
All may be fine when things are going well…. but it can tear a business apart if they start to hit problems and when the pressure mounts.
Here are some steps to take for strong foundations:
• It's essential to believe in your product and it's right to be positive about how successful it and you will be, but it's equally worth having have a crisis plan in place to deal with problems. How are you going to manage problems? What steps will you take?
• If you see a problem starting to develop, act! Don't wait and don't assume that things will turn out alright in the end. They might, but be prudent and take advice, use your accountant but don't expect the majority of accountants to be turn-around specialists, normally they are not.
• Always, always, file your annual accounts, submit your annual returns, P35's, VAT returns and all other HMRC requirements on-time.
• You need to be very clear about individual roles and responsibilities, profit's share, and what each person’s contribution to strategy will be.
• Have a detailed business plan and vision - even if you have to revise it every month. Measure and monitor regularly to check you’re on track.
• Use a good accountant. If the firm cannot fund an internal position then work with a firm who will contribute by holding a watching brief. Involve them on a monthly basis. It will cost, but it can be worth it as the business grows, or as circumstances change and it's critical if the business has borrowed from secured lenders like banks.
• Produce monthly management accounts and review and understand them.
• If possible, involve a non-exec director to act as a mentor/advisor. Again, this will come at a cost but you usually get more than you pay for.
• Above all else, do a weekly or daily if possible Cash Flow analysis. This really is an invaluable tool for managing and understanding your business.
Some of this may seem tedious and will appear to add little value to your business, but if you think about it, it all helps you to understand where your business really is. If you know where you are, it will be easier to see where you’re going.
George Davis is regional manager for the East Midlands for KSA Group, one of the UK's leading turnaround and insolvency specialists and specialists in company voluntary arrangements and business rescue. Visit www.ksagroup.co.uk for more details.