The old adage that you should be working on the business and not in the business is always tossed around in mentoring circles. I do understand the significance, but upon hearing this the majority of small business would say ‘if I stop working then there is no business’. But I’d like to walk you through the important meaning behind this statement, which relates to planning.
You would have heard the saying ‘fail to plan, plan to fail’. Well, this one is true. Think of it this way – you can get in the car and drive, and yes you’ll end up somewhere, but you won’t end up where you want without pre-planning the journey.
This is one of the biggest mistakes small business make.
Lack of planning or direction can be the cause of your demise. If you aren’t looking at where you are going, how can you see opportunities or threats or be prepared to deal with uncertainties like cash flow or profit fluctuations, interest rate rises, increase in material costs? The list goes on…
In mentioning interest rates, I’m pointing to the effect that rate rises have on consumer spending – which in turn affects small business. Rising interest rates make consumers less willing to spend their hard earned money, not only as they have less disposable income (as they are putting that money into higher mortgage payments) but the uncertainty of what is to come.
If you’re working ON the business and looking at appropriate timely reports, such as KPIs and financial indicators, you’ll be better able to make quick decisions.
Meeting with your accountant regularly can also help you see the turn in sales and react accordingly, which may include reducing overheads, cutting spending or turning to your banker for short term finance.
Your business will experience the impact of interest rate fluctuations on your industry – and planning and monitoring is the key to your survival.
If this sound like something you haven’t done, call us, we’re here to help.
