10 reasons businesses fail!
TRANSCRIPT
10 Reasons Businesses Fail!
Phil Mitchell
Director of Harbour Key Limited
June 2017
The stats……….
32% of businesses fail due to poor management of financial activities.
Small business survival rates have been as high as 91% after one year of trading……..but after five years just four in ten small businesses will still be trading.
Not just SMEs – What happened to Woolworths and Jessops etc.
Failing to track your finances
Learn/pay strict attention to your finances.
Making decisions based on insufficient or NO financial information is not going to help you understand your business.
Action:
Use from an early stage a financial management software package, so you have timely, meaningful and relevant information.
Inadequate Business Plan
Action:
Prepare a business plan:-
Forces you to think about the future and the challenges you’ll face;
Makes you consider your financial needs, your marketing and management plans, your
competition and your overall strategy;
Can be reviewed regularly and used as a measure.
Not understanding your pricing structure and margin
How much are you making on sales/service?
Pricing has up to four times more impact on profitability than other improvements.
Action:
Review & check pricing regularly:-
All prices must cover costs and profits;
The most effective way to lower prices is to lower costs;
Get an understanding of what customers will pay;
Not all business is good business.
Poor Cashflow
Cash if King – Life Blood of the Business.
Action:-
Invoice promptly;
Make sure the invoice details are correct;
Understand what you need to do to get paid;
Know your customer;
Payment terms & conditions;
Late payment interest;
Chase and escalate.
Lack of reserves
In simple terms – No savings for unexpected increases in the costs of items like utilities, materials,
labour and tax!
Action:-
Operate a separate bank account as a savings account.;
Have discipline to put a % away each month.
Lack of or in appropriate credit
No credit – Not good!
The wrong type of credit – Not good!
But credit is not a bad thing.
Action:-
Shop around for credit.
Not managing tax
Taxman always last to be paid!
HM Revenue & Customs is the biggest creditor in business insolvencies in the UK.
Action:-
Manage your taxes, they are not optional!
If going to struggle to pay speak to HMRC at the earliest
opportunity;
Maximise benefit of tax reliefs such as capital allowances and
research & development.
Failure to submit/file tax returns on time
Late accounts/tax returns = penalties (waste of money).
Risk of investigations.
HMRC will not consider time to pay arrangements.
Action:-
File your returns on time;
Tax investigations fees insurance.
Poor process and procedures
Poor controls & processes lead to problems, not only in finance
Good processes means fewer errors & delays
Increased costs & poor use of resources
Action:-
Use modern technology;
Review regularly, as you grow processes need to change & adapt and
Communicate the changes and check they are being followed.
Not taking advice
Action:-
Appoint a good accountant/adviser;
Take the opportunity to get free advice and
Network to talk about your business.
Other non financial reasons:
Failure to understand costs, markets and key customers;
Allowing customers unnecessary discounts/too many loss leaders;
Growing too fast - growth is desirable, but over expansion is a serious error;
Poor choice of location: - avoid cheap lease temptation;
Poor customer service, employee incompetence etc;
Failing to change with the times: - The Kodak story;
Ineffective marketing;
Underestimating the competition;
Concentration of risk - relying on a small number of customers;
Lack of focus;
Lack of insurance;
Poor management structure;
No data security or back-up systems on IT failure;
Not seeking help.
© Harbour Key Limited All rights reserved
This material is published for the information of clients. It provides only an overview of regulations in force at the date of the publication, and no action should be undertaken without consulting the detailed legislation or seeking professional advice. Harbour Key Limited can accept no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained within this summary.
Any (more) questions?......
This material is published for information purposes only. It only provides an overview and no
action should be taken without taking professional advice. Harbour Key Limited can accept no
responsibility for loss occasioned by any person acting or refraining from action as a result of
the material contained within this summary
© Harbour Key Limited All rights reserved
This material is published for the information of clients. It provides only an overview of regulations in force at the date of the publication, and no action should be undertaken without consulting the detailed legislation or seeking professional advice. Harbour Key Limited can accept no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained within this summary.
Phil Mitchell
Director
For and on behalf of Harbour Key Limited
Midway House, Staverton Technology Park, Herrick Way, Staverton, Cheltenham GL51
6TQ
t +44 (0) 1452 713277
m +44 (0) 7877 409102
www.harbourkey.com Sign up today for newsletter
Harbour Key Limited is a company registered in England and Wales number 07483339.
Registered office: Midway House, Staverton Technology Park, Herrick Way, Staverton, Cheltenham GL51 6TQ
Contact us
This material is published for information purposes only. It only provides an overview and no
action should be taken without taking professional advice. Harbour Key Limited can accept no
responsibility for loss occasioned by any person acting or refraining from action as a result of
the material contained within this summary