Mark Hooper founded Indycube six years ago to change the way Wales does business. We asked him to give some top tips on how business people should manage their finances. We thought he'd have some top tips, given that he qualified to be an accountant, and all that....
When I began my career I was convinced, above all else, that I wanted to be in business. I wasn't entirely sure what that meant, but it led me to consider a number of professional qualifications - and for a number of reasons, I chose accountancy. For what seemed like an eternity I spent my evenings working on my accountancy exams whilst working full-time. I vowed, never again!!
As my career progressed, it became clear to me that accountancy was never going to be the focus of my work. I would much prefer a conversation over a coffee about business strategy than working on some suite of financial accounts. That being said, the training has helped me to understand what's important and what's less important in relation to running a business. Here are my top five important things.....
Tip 1: Know your key data
The number one skill I developed, that stands me in good stead today, is that I feel comfortable dealing in figures as well as words. Any business owner whether a freelancer, start-up or something more grandiose, needs to understand some key financial indicators relating to their business. This doesn't have to be rocket science, far from it, but do make sure you know what your current and projected SALES are; how much GROSS PROFIT you're making (in total, and for each customer), and critically how much CASH you've got in the business, and how is that looking into the immediate future. Remember, lots of profitable businesses fail because they run out of cash!
Tip 2: Know your own financial requirements at home
This is particularly important if you're just starting on your self-employed or start-up journey. I think lots and lots of businesses that fail, could have survived, had the business owner been able to keep going for a little bit longer. Ultimately, this often comes down to making sure you've got sufficient cash to feed your lifestyle (chances are you'll be lowering your cash needs for the launch period, but make sure it's sensible).
Tip 3 : Don't over extend yourself chasing ambitions that are out of reach.
Business planning can encourage you to 'believe the hype'. Loads of business plans that I've seen show the owners turning over £millions within the first three years. You can no doubt imagine, this rarely turns out to be true. Keep your feet on the ground, and even if your business plan is ambitious (and I'd hope it is), know your 'what if' scenarios too e.g. what if that key customer doesn't buy from us; what if the office costs are higher etc.
Tip 4 - Know when to call it a day.
If customers aren't buying from you (and I mean really buying; paying hard cash for what you've produced), make sure you don't keep on at it. Chances are you'll have learnt loads from the venture, that you can put in to the next one, or as great experience on your CV. Your ego may be bruised, and you may have lost a bit of money, but you're alive!
Tip 5: If tips 1-4 fill you with absolute dread and loathing, it isn't the end of the world. Running your own business doesn't suddenly mean you know all there is to know about everything. In my experience, the most successful business people ensure their skill gaps are filled by other people. So, if you just don't get figures, get someone in who does. This could be a business partner who knows the ropes, or simply a book-keeper who keeps you in order. I'd always search for someone who comes personally recommended - that's worth a thousand Google searches.
So to conclude - whether it's the financial stuff that oils your wheels, or like me, you enjoy the people side of business, some things just can't be left to chance. Keep cash flow at the front of your mind, and make sure you're focusing on the things you're good at - and if finance isn't one of these, get someone in who can.
Blog post by Mark Hooper, founder of Indycube