Know Your Numbers

People ask me what the first thing to do when a business is in trouble. The obvious answer is “Cash Flow”. Cash is king – everyone knows that (almost everyone). So unless cash position is healthy everything else will fall apart. Fix the cash, stop the bleeding, then panic disappears and calmness ensues.

What the not so obvious answer is this: “know your numbers”

Before we try to fix cash flow it is imperative that we know the numbers. Everything from sales figure, profit & loss, cost of goods, cost of operations, hidden expenses, and so on. If we are to have a chance to get to the bottom of the pit we need to keep digging .. and keep digging.

Some people are happy enough to get “an idea” of where things are – trusting their gut feeling and intuition. There is nothing wrong with gut feeling and intuition. Those are important to make a quick decision. But when the time comes to make a more involved and analytical decision such as “where to cut cost that does not affect the core business” – intuition can be misleading.

Knowing your numbers can be heart-breaking. Most business owners in trouble might avoid this because they know the numbers are bad. They couldn’t face reality. Some convince themselves into denial – hoping and praying that everything will turn around tomorrow, or the next day, or the next day.

The problem is of course, the longer they wait the worse it will get. If you cannot do anything with the business then at least do something else. The point is, you have to do something. And all of these start with knowing your numbers.

Knowing your numbers will not kill you, not knowing your numbers will.

A lot of things in a business are out of our control. We can only do so much, try to anticipate, be pro-active, and response to the best of our ability. Everything else is not our problems because we couldn’t control them anyway.

So don’t feel bad or afraid, we are only humans. In other words, don’t be too hard on yourselves. Know your numbers and improve, or exit and do something new.

 

Startup Illusion

Starting a business can put someone’s mind into overdrive. It will then either shut him down or propel him forward. The euphoric moment will last as long as financial resources have not dried yet. With enough funding, the startup party can sometimes last for years. It is only after investors start demanding (sometimes not so) reasonable returns that the party turns into a big reality check. The dreams have dissipated into thin air, and cloud of judgement descending onto earth.

Party is over.

That’s the hard truth of starting a business. It will get worse before it gets better (if it does get better). Starting a business is like eating a box of chocolate – mixed with some not so edible foods. You never know what you’re going to get but the only way to find out is if you keep eating. In business we never know what tomorrow will hold, it can be a disastrous day or a day when we beat all sales record. The only way to find out is if we wake up in the morning and go to work. The only way to eat the good chocolate is if we keep eating the bad ones.

Some people are addicted to starting businesses. They have brilliant ideas, get the funding,  and off they go with an exciting venture. They don’t however stay long enough to feel the downturn, the heartbreak, the never-ending pressure, and the struggle. When things go south, they are the first ones to pack up their bags and go – some of which utilise bankruptcy regulation to move on.

Some people however, are born to build businesses. Not only that they will start their businesses themselves but they will also see to it that their ventures are successful before they move on. If things go south, they will be the last people in the company to pack their bags. Some might take part-time jobs to help with the cash flow.

There is one distinct difference between real entrepreneurs and wannabes – perseverance.

The startup illusion might be alluring but the hard reality is not as glamorous. Starting a business is hard work, it requires sheer mental strengths more than mere intellects or skills. Building a business is about getting up in the morning, go to work not knowing what will happen that day, persevere throughout the day, and then do it again the next morning.

“Being an entrepreneur is like eating glass and staring into the abyss of death.” –Elon Musk

The Call of a Busted Region

In the past few years Australia has faced one of its darkest moment in economy. The ten years mining boom busted leaving trails of destructions along its previously glorious paths. Businesses succumbed to the crisis, closing their doors, loosing millions in the process. The trickle down effects continued for years affecting even those mom and pop businesses around the corner.

Gloom and doom is the mood.

Unemployment is on the verge of a dangerous level. Government is scrambling to control its finance, trying to off-load some of them onto the tax payers. The strengths of dominance from large conglomerates keep the cost of living at unsustainably high level.

Has the long search for wealth completed its journey? Is there anything left to find? It is a moment of despair, yet opportunities are abound for those lucky enough to have left-over resources. Those with resources are feeding on the battlefield. The wounded and dying have given up. The rich gets richer and the poor gets poorer.

The lucky country is not so lucky anymore.

Should we give up?

Do we have the strengths to carry on?

These questions mark the beginning of another journey. It is through adversity a person grows stronger as those who tried to kill him has failed. The survival alone is enough testimony to the strengths required to carry on.

It is only at the bottom of the pit that we have the moment to find the strengths to carry on.

While opportunities have dried up for most people, those who survive are sitting in a pool of hidden gems. The dust has not settled yet but the smell of money is permeating the air. The call of money is echoed through the regions. Those who are brave enough will stand up and dust off their gears.

They are ready for the next challenge.

They are ready to answer the call from a busted region not yet finish with its blessings.

 

 

 

 

Tax time .. again ..

Not sure how it works in other parts of the world.  Here in the land of down under our financial year is from July to June.  So, being the 2nd of July 12, it is tax time for us.  Workers will most likely get a little bit of tax back, but businesses on the other hand must pay off their taxes which have accumulated in the last 12 months.

When we get into the day to day running of a business sometimes the last thing in our minds is simply – making sure we have enough cash reserve.  Too many times when we look down on the dangers of not having enough cash reserve, we are caught in cash flow problems.  Some of which come during tax time.

The habit of putting aside a little bit of cash is not only good for the rainy days (and tax time), but also at the same time increases our awareness of our financial conditions.

Now, there are two more things we can benefit, from this saving habits.

First, we get to accumulate cash which we can divert into investment.  Properties, equities, or simply plans and equipments.  Second, we get to be creative with our limited cash in our disposals.  We can do things with limited cash that other people have never thought about, simply because they’ve never been in our positions.  This will definitely push us further in our competitiveness in the market.

So, happy savings, build an investment portfolio, and be creative in limited cash environment.