Last week, I caught up with a successful Canberra-based sportswear retail entrepreneur. When sharing about the challenges we faced as business owners, I was glad that my counterpart had learned the importance of bookkeeping and understanding the numbers in his business. One of his biggest mistakes was to hire a low-cost bookkeeper and to outsource all finance-related matters to the bookkeeper, thinking that it wasn’t his job to know and understand the numbers. This is a common pitfall among most entrepreneurs. Yet when they start to track and understand the numbers, many entrepreneurs see a rise in their sales and profits.
It doesn’t matter which stage your business is at, planning ahead helps your business to chart a course for the achievement of goals. And a good business plan depends on numbers to make it concrete, because some things can’t be explained with words alone.When writing up your business plan, start by throwing all the essential numbers in a spreadsheet and determine if you are able afford the start-up costs with your current financial status. Entrepreneurs tend to underestimate the start-up costs involved. Be conservative about the actual costs that will be incurred and put in place a system to track and review your weekly or monthly financial status.
For start-ups that are already in business, the focus is on knowing the actual numbers and comparing them with the expected numbers, which will help to inform decisions on the changes or improvements needed. At this stage, entrepreneurs should be clear about their margins and stick to them. Don’t try to grow sales rapidly at the expense of your margins, there are serious consequences that will follow if your income doesn’t keep up with your expenses.
My sportswear entrepreneur friend successfully raised over $600,000 for his business a few days ago, and the key to his success was knowing his numbers, which added clarity to his business proposal and ultimately convinced the angel investors to invest in his business. Investing in a start-up is after all a risky affair so investors need to go through the nuts and bolts of your business and be assured that you are in control of your business finances. Most investors expect a healthy growth of your business, so a forecasting model that is robust and correlated with the actual performance of your business is also crucial.
If you are start-up entrepreneur and are struggling to understand the numbers in your business, why not reach out to us and we can have a chat about your business plan. We have good working relationships with many entrepreneurs and start-ups, and who knows, we might also recommend you to the right person or a highly experienced mentor to assist you in your start- up journey. To read the full version of this article, visit us at:
Harry Hoang is Tailored Accounts Executive Director