Turning the Tide: Our Top 4 Tips for Keeping Your Business Afloat

Being a business owner is one of the most demanding and fulfilling choices you can make. It’s filled with visions of being your own boss and the freedom to make your own decisions. The lifestyle can entice you with notions of setting your own work hours and schedule. Reaping all the financial gains sounds pretty sweet too, never mind the glaring personal satisfaction, creative freedom, and the untamed ability to make a real supersized impact. The rewards are plenty. 

But being responsible for almost every aspect of a business can be heavy. There are the financial risks from pledging your hard-earned money, to saying goodbye to a steady pay cheque with no guarantee. That stress alone can keep you up at night, never mind the rest. As a business owner, you are the business, so worrying about customers, staff, operations, suppliers, bills, competition is now yours alone. There’s a lot to juggle and it can be hard to step away from your business. 

Pursuing your lifelong dreams is an incredible experience and research indicates it can be a whole lot more satisfying. We get it here at PrimeAdvisory too. We started out just like many business owners do. Armed with passion, dreams, and some financial skills, we set out on a mission to harness them, help more people and build a successful company. And we’ve done just that. Today, we’ve grown to more than 25 team members pushing the business to new levels and helping more business owners and individuals make their lifestyle and business dreams come true. 

At Prime, we like to say you’ve worked hard for your money, so now it’s time to make it work hard for you. So whether you’re just getting started, scaling up, launching new divisions or locations, or simply riding the waves of success, managing your business requires serious attention. But it shouldn’t be constant attention – as in 24/7. After all, you don’t live to work!

If your dreams are keeping you up at night and you’re wondering about your business or financial health, we’ve got you covered. Here are our 4 early warning signs that your business might be headed for troubled waters – and of course how you can steer the ship back on track. 

• How’s your profitability meter? Unless you’re running an honest charity, turning a profit is essential. Without sugar-coating reality, it does take some sweat equity to turn your ideas into a real business with a steady income, attract clients, and keep staff focused on delivery. Even with perfect execution, there can be a hefty list of investments to get started and keep running too. New business owners can see an initial dip in salary until things level out. In fact, it can take a few years in some cases. So it’s really important to keep an eye on which direction you’re headed.
  
  Keep tabs on what’s left over after deducting expenses from total revenue to see how you stack up? Here are a few popular calculations.
  
  Gross Profit Margin = [(Revenue – Cost of Goods Sold)/Revenue] x 100%
  Net Profit Margin = (PAT/Revenue) x 100%
  EBITDA Margin = [(PAT + Interest + Taxes + Depreciation/Amortisation)/Revenue] x 100%
  
  It can be easy to be distracted by the dollar signs – especially when they’re big. But if you’re earning $1M in sales each month and paying out $1.2M/monthly across overhead, payroll, and operations, you’re in the red. Without righting the course of action, reserves will dwindle and long-term viability can be at risk. If you’re faced with the fact you’re losing money, don’t fret just yet. We can help design a recovery plan that helps balance those books and bring them back to black.

• Cash will always be king. Cash is in continuous motion. It’s always coming and going, so managing your cash flow is important to making sure you always have what you need. It’s important to keep an eye on your financial position in case you need access to credit in the future too. So if you’re not sure how healthy your cash flow is, take a look at: 

your cash deficit – do your statements and forecasts show a negative?
your customer payments – are they on time, irregular or late?
your supplier payments – do you struggle to pay your debts on time or in full?
low profits – high turnover rates are great, but do you have the full picture?

• Slowing sales and the sound of silence. Sometimes our customers slowly fade away. As they start to call less often, it could be the sign of a coming break-up. Perhaps they’ve taken their business to someone else or perhaps demand is drying up. If there are complaints, it’s an opportunity to learn and grow. But when the phone stops ringing, the sound of silence can be deafening. Reaching out to loyal customers for honest feedback on how your business is meeting their needs and delivering service is a good place to start digging. If you’re feeling brave enough and have solid relationships with those who’ve defected, it could be worthwhile to ask why and you might even get a chance to earn their business back.

• Record-keeping and government rules. Everyone has compliance obligations, and business owners have many. From lodging regular BAS statements to keeping clear and concise records, sloppiness is not your friend. While keeping clean books can feel tedious and even dreadworthy, it’s an essential step that allows you to take a quick business pulse and to be able to keep the government happy. Tax and compliance, licensing, and payroll are a few matters you need to be in-the-know about. A financial advisor can help make sure your records are pristine, your finances make sense, and can keep the government from showing up on your doorstep. More importantly, a proactive accountant can go beyond compliance to finding ways to help you keep more of your hard-earned money, which will help boost your bottom line.

Curiosity breeds enlightenment. If you’re curious to know more about the health of your business with a non-financial lens, take our 3-minute Business Owner Health Check. It’s a quick gauge of how satisfied you are with your business, without worrying about the need for spreadsheets, records, or tax statements. You’ll find out in just 12 simple questions whether you’re flying high, or really feel like you could use a helping hand.

Partner with a financial advisor you trust. Being an owner means getting up to speed on every aspect of your business, including the finances. Instead of trying to become a financial expert overnight, pick one you can trust to have your back. You’d be surprised what a difference a great financial advisor can make to taking the stress out of owning a business! All elite athletes and successful entrepreneurs know that it takes a village to succeed. Fast-tracking success means setting the right financial goals, coming up with a brilliant plan, and keeping you accountable so that you can execute daily.

A proactive accountant learns about you, your vision, and your business condition to recommend the best course of action. The right advice is invaluable to help fast-track your success, avoid costly errors, and provide peace of mind that you’re on the right pathway to achieving your business dreams. Make sleepless nights a thing of the past and drop me a line for a chat owner-to-owner with me – Christian. I’ve walked a mile in your shoes and I’m happy to help you get on the right track today.