Going it Alone? These are the Pitfalls to Avoid
There has never been a better time to be an entrepreneur. But ideal market conditions and technology do not mean success is guaranteed.
Today, ambitious business people from every walk of life are leaving their employers in their droves and setting up on their own. From architects to accountants and from web designers to window cleaners, this truly seems to be the age of the entrepreneur.
The Cambridgeshire fens have always attracted those of an entrepreneurial spirit, and accountants in Peterborough have noticed that this area in particular has seen an increase in new business startups. They see two main drivers: on the one hand, technology and the ability to work remotely from anywhere make startup costs more manageable. On the other, the general malaise in the global economy over the past decade has meant that opportunities in the corporate world are reduced, so there is less to lose in going it alone.
They have also seen a number of challenges that consistently put new entrepreneurs at risk, and can endanger the viability of a new business when it has scarcely got started.
1) Managing cash
There are many businesses that have been successful, with good margins and a full order book, but have gone under overnight because they have failed to manage their cashflow. Many entrepreneurs have amazing vision, fantastic customer service skills and are full of great ideas. But they are often less efficient at managing the mundane, everyday aspects of a business. That’s fine, as long as they have someone at their right hand with the right skills. Which brings us on to number 2).
2) Having the right accountant
New businesses tend to start lean, but the entrepreneur who thinks he or she can do everything is unlikely to succeed long term. As mentioned above, aspects like cash management are vital, and need to be entrusted to someone who knows what they are doing and who understands the business. It doesn’t necessarily have to be an in-house employee. There is nothing wrong with outsourcing the accounts to a local firm, but a good relationship and regular communication are vital.
3) Having the right software
Good accounting software makes the financial side easy and intuitive. There are lots of options out there, so discuss with your accountant to get software that will do the job without being excessively expensive or complicated. The easier it is, the lower the likelihood of things being forgotten or mistakes creeping in.
4) Implementing the right processes
A business operates like a machine, with many moving parts. When you start up on your own, that’s one thing, but as the business grows, so the systems need to evolve. Periodically taking a step back to review process flow, from the receipt of an order to getting paid is an important part of managing your medium term strategy.
5) Seeing the big picture
One of the reasons it is so important for an entrepreneur to have a good relationship with his or her accountant is that both need to understand the business from each other’s perspective. Medium and long term strategy, growth plans and new product development are all tied in with profitability, cash flow, liabilities and so on. Work together to put the pieces together, and you have the best chance of driving the business forward to long term success.