The Top Ten Points To Business Success

Bevan & Buckland logoWhether your business is a start-up or long established you may face cashflow pressures at one time or another.  Inevitably, a small percentage of businesses will fail.  To make sure that your business survives for the future – Bevan & Buckland’s experience in dealing with all types of business over the last 30 years suggests the following are key areas for you to focus on.

1   Start with enough capital

For your business to succeed you must maintain cash reserves to survive economic downturns or an unplanned “disaster”.  It makes good sense to finance property purchases over the long term with a capital repayment mortgage over 20 years and keep a cash reserve for a “rainy day”.  Using up all your cash reserves to pay off long term property debt is not recommended when, as at present, the inflation rate is higher than the bank rate.   As a rule of thumb your long term borrowing should not exceed 50% of the asset value. Also, consider financing machinery purchases over 3 years rather than using up cash to pay for the whole cost on day one.  Even better – can your business perform adequately without buying expensive machinery? 

2       Get your pricing right

There will always be some-one cheaper and markets only seem to become more competitive.  However, your prices must be sufficient to cover your overheads and make a profit.  Sometime you will have to say no to unprofitable work to ensure the viability of your own business.

3   Spend less than you earn

This sounds simple but a significant proportion of business owners have difficulty with this.  When you calculate how much profit to draw from your business you must make an allowance for tax.  For a business generating cash is business oxygen.   You need it to survive.  If you generate cash you will inevitably pay tax.  Your accountant will do their best to ensure that your tax bill is kept as low as possible.  However, to make sure that a surprise tax bill does not catch you out it’s a good idea to open a second bank account which acts as your tax savings account.  This is particularly helpful where your tax payment date is several months after your financial year end.

4   Avoid bad debts

The importance of strict credit control procedures cannot be emphasised enough.  You won’t make a profit until your customer has paid you. 

5   Keep stock levels to a minimum

Over ordering a product or ordering the wrong product mix can tie up too much cash.  A well stocked business may look attractive.  However, stock represents cash.  And having too much cash sitting on your shelves is not a recipe for success. 

6   Don’t give personal guarantees

If you are trading in a high risk business sector, such as construction, then consider trading through a limited company or LLP to take advantage of limited liability.  If you do trade through a limited company then think very carefully before giving a personal guarantee to your supplier.

7   Avoid credit card debt

With credit card interest rates typically in excess of 16% no business or individual can afford to pay these finance costs.  If you must have a credit card then pay it off monthly.  If you can’t you may have deeper underlying cashflow problems which you should discuss with your accountant.

8   Be properly insured

Never overlook your insurance cover.  Cutting corners on business insurance cost to make short term savings can lead to disaster in the event of destruction of a major asset. 

9   Look after the customer

Business competition is likely to increase as all businesses become aggressive in gaining market share particularly where there is a low barrier to entry.  Customers will inevitably be less tolerant of poor service.  The growth of the internet also means that most businesses will have to have an internet presence in order to maximise returns in the future.

10 Confront difficult issues

Poor management is often cited as a reason for business failure.  You will, from time to time, have to confront issues and make deeply unpopular decisions to ensure the long term survival of your business. 

This article is necessarily of a standard nature.  However, it is hoped it may be relevant to readers.  If you have any specific queries then please do not hesitate to contact Alun Evans – Accounting and Insolvency Partner of our Haverfordwest Office.

Alun Evans
01437 760666

email: alun@bevanbuckland.co.uk

It might be easier for you to contact one of our other offices?

Bevan & Buckland Accountants Swansea Tel: 01792 410100

Bevan & Buckland Accountants Haverfordwest Tel: 01437 760666

Bevan & Buckland Accountants Pembroke Tel: 01646 682383

Bevan & Buckland Accountants Carmarthen Tel: 01267 233115

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