part0015

Like it or not, there is a residual fear, even among people in business, in talking about money. Many are even too worried to look at their personal bank accounts for fear of what they might see, and I can relate to that well, having been there myself until I recalibrated my relationship with money via my business. If we could all only break through that taboo and be more familiar with the concept of talking about money more openly. Especially if it’s bad news, because that’s the time when you need to make decisions and manage things going forward, such as cashflow (which can bring anyone out in a cold sweat from time to time). Avoiding talking about it is possibly the worst tactic any business owner can adopt, especially during more difficult times. It only adds to stress, people start to close down and make poor decisions, and the people around them notice how irritable they’ve become. Morale drops, performance slows and the business grinds to a halt. If we could all only embrace our growth mind-sets and learn more about the true value of money, and how central it is to the life of the business, day in day out, minute by minute, second by second, then the lifeblood of our business would flow more freely and keep the heart alive.

Money isn’t simply the end-game reward of your enterprise; it’s connected to the whole business. While that might seem obvious (and who doesn’t keep an eye on the money in their business?), it’s surprising how little attention it gets outside of revenue generation and paying the bills. I realised early on that money wasn’t my strong point, until I began to recalibrate my understanding of it, and now my view of it has changed completely. In this chapter I’ll be sharing some facts that I either had to learn the hard way, or as a result of revaluing the value of money.

Thinking back to Chapter 8 when I described the rhythm of a business and its heartbeat, now imagine that money is the blood of the business that runs throughout its veins. Otherwise, it’s dead. That’s why you have to have a velocity of money running through the business, and with positive pressure to make everything work, as well as enough spare to act as working capital. If your business was a patient in a hospital (because, in all honesty, the reason you’re reading this book may be because it’s possibly not functioning in the way you want it to) then the doctor would first check the vital signs and, from them, form an understanding of how healthy the body was. It’s the same with money: you need an understanding of money’s vital signs and how these affect the business. The patient record in this case will be your management accounts. Otherwise, you’ve no way of knowing how well you’re doing, or if you’re looking a little poorly, which makes a prognosis difficult.

The big learning for me was getting to grips more with the management accounts. It’s not exciting in all honesty, it’s the really dry, but essential arse-end of the business that gives you the fuller picture of how well the business is doing. Coming to terms with these accounts is certainly not something you should avoid doing, and I recommend your accounts are drawn up (ideally) on a monthly basis or, at the very least, quarterly. If you don’t employ your own in-house finance person with the competency to prepare them, then engage an accountant to do this for you. It’s not expensive, and by seeking recommendations from your local business peers, you’ll soon source a reputable accountant they trust. It’s essential, there’s no excuse for putting it off if you want your business to grow and scale up. All it requires is someone to prepare your:

As soon as possible, allow your growth mind-set to enable you to learn what you don’t already know about money and accounting. There’s no lack of printed material and courses dedicated to financial management for non-financial managers and I’m adamant that investing in this learning was one of my best areas of business growth. I wish I’d understood more about money when I first started my business instead of passing the buck to a bookkeeper and hoping for the best. At least these days, even though I’m no financial wizard myself, I can ask the right questions, interpret results with more confidence and respond more quickly when money becomes an issue. Having a growth mind-set and wanting to learn as much as I need to, I’ve reached a point where I can query and question an accountant and ask, ‘What does this mean?’ That question serves you well, especially when you ask it on a regular basis. It’s ludicrous to ask this once every twelve months only to discover that while you might have sold twice as much as the previous year, your overheads have spiralled out of control, and/or your unit cost price isn’t anywhere near what you thought it was. In fact, you’ve probably been selling at a loss. The truth is, a year down the line might just be too late to discover your shortfalls, when the business is on its knees and you can’t turn the situation around.

Money needs to flow with velocity around the body of your business. If your ambition is to grow your business beyond its current position, then how can you know what success is if you don’t actually determine whether it’s growing in a profitable way? Even if your strategy might not be to generate short-term profits, you still want to grow and increase your market share – and for that, you not only need money, you need to understand it. That’s why, by knowing your numbers inside out and being familiar with them on a regular basis, you’ll identify how well the business is performing and, if needed, pivot, adjust, shift, cut back, throw more in, or whatever you need to do in order to keep the business vital. It’s not enough to rely on your gut feeling alone and hope that it’s right, because I can tell you from my own experience (which is typical) that gut feelings aren’t anywhere near as reliable as knowing the hard facts.

I love the fact that I am constantly empowered through learning and I’ve certainly made my recently acquired knowledge of money work for me. Save the butterflies in the belly for the inspiration and dream part of the journey and let your head, not your heart, do the talking when it comes to money. Knowing that I can see and understand how the business is faring, and that the business body is healthy, allows me to sleep at night. When you get to really know money, you immediately see the areas where you can save money, because you understand better how it affects your profit and loss in your balance sheet. If you’re building your business to eventually sell, you certainly need to have an understanding of this. When I began this book by talking about having a growth mind-set, I wasn’t encouraging you to sit cross-legged on a beanbag sipping on a chai tea; I wanted you to begin making the links between a growth mind-set and all the elements I’ve covered in this book. A growth mind-set equals me being able to help my business grow, and to ultimately make more money. Not just for me, but for the really talented people that I work with who will benefit from the phantom share scheme. They all know what the business is worth, they all possess similar growth mind-sets and all have an abundance of IEA. We’re all driving for a common goal and striving to outwork the competition, because we all know what’s at stake. If you’ve never considered a monthly management meeting about money to be the most exciting day at the office, then perhaps you should think again. It’s only numbers, adding up and taking away, but keeping on top of them is priceless in terms of business.

When I explain my relationship to money in this way to the SME business owners I mentor, I can literally see the colour rushing back to their cheeks, having gone pale when I originally asked them about their management accounts process. From that point forward, they begin to value money in a completely different way. What’s your relationship to money been like so far?