I recently interviewed Kevin Pigg, founder of Surviving Business, for my KBZNZ radio show. When Kevin contacted me about being a guest on Business Genies, I was intrigued by the fact that, after years as a successful entrepreneur with his retail plant and garden center, and high end landscaping business, his curiosity about why some entrepreneurs succeed while many others do not, led him to create a new business that helps fellow entrepreneurs avoid the start-up pitfalls that lead to failure and emulate the activities of those who have succeeded.
What interested me was that it’s almost the exact same thought processes that lead me to put a profitable consulting business on the back burner and create CFO Genie. While Kevin’s focus is primarily on the how-to’s of start-up, I saw a definitive need among small and mid-sized businesses that made it past the start-up challenges, yet faced the real potential of failure as they grew. There’s no doubt that these business owners knew their industry; what they sorely needed now was the financial intelligence to drive their companies forward. And, experience demonstrated that the only way to garner the necessary intelligence was through continuously measuring business performance, or more commonly called financial analysis. Yet, the one thing they lacked was the ability or resources to do so. What they needed was an analysis tool that could be used with very little effort and provided reports that could be understood even by someone with no formal financial training.
It’s the ability to measure business performance that opens the right door for discovering why a company didn’t earn the profits it should have; shows how much profit should have been made, and provides the “big picture” data that enables business owners to take control and make informed business decisions.
As a business owner, even if numbers aren’t your strength, you still need to understand what they mean in order to operate your business. Without this analysis you might very well proceed never knowing where, or even that, your company is leaking tremendous amounts of cash. Consider the following: on average, small to mid-sized companies often fail to capture between 10 to 30% of their revenues as profit. The math is simple; say a company does $1,000,000 in sales with a profit of 10 percent or $100,000. Add 15% of the sales to the profit and you have $250,000. Without making one additional sale, the company has increased its profit line 250 percent by knowing where to look for the cash leakage and then taking corrective action.
Business owners who understand these metrics have a tremendous advantage over those who do not.
Whether you’re a start-up or a small to mid-sized business there are pit-falls that can suck you down into failure, and most of those black holes, in one way or another, can be traced back to money issues. Understand your financials and you increase your chances for success.
For start-up advice contact kevin@survivebusiness.com and listen to Business Genies on KBZNZ (www.kbznz.com) To learn more about the financial analysis software CFO Genie visit www.ceo1stop.com.
Max Gregorich
CEO, CEO1Stop