One of the first things I ask my new or prospective clients is whether they know their break-even figure, or if they produce a cash flow. The majority of business owners will waffle a bit about how they do “sort of”, but ultimately accept that they do not have control of their numbers. Often people will make wild claims that they don’t need to do this in “their business”, or that they don’t have time for it, but in reality it is far more likely that they simply don’t have the skills, and numbers are largely alien to them.
I suppose if I’m completely honest I was like that when I started my own business nearly 8 years ago, but it soon became pretty obvious that sticking my head in the sand, and hoping things would work out OK was not the answer. Learning the basics of break-even and cash flow is genuinely not particularly complicated. I find that because I had to work it out for myself and have subsequently explained it to numerous clients in layman’s rather than accountancy language, that people can grasp the principles quite quickly, or at least to a level at which they can understand what is going on in their business, and perhaps just as importantly, be able to ask the right questions of their accountant and their staff.
I still find it amazing to see the change in the stature and confidence of my clients, as their new found knowledge allows them to take control of their numbers, and therefore of their entire business. No longer are decisions based on guesswork and hope, which means that the results of these decisions are generally far more successful.