Why do businesses fail? I asked myself this question after scrolling through Facebook and noted that a business was marking their goods down and selling their fit outs.
This business had not opened that long ago.
So, the question remains…why is it that 60% of new businesses fail within the first twelve months?
Having been an Accountant for more than 17 years, you get to see businesses and organisations that do well and those that don’t.
So, what’s the magic formula for those businesses who grow from strength to strength? Is there such a magic formula?
HKS Russell was established back in 2011 to provide guidance, mentoring, training, CFO services, business advisory, management accounting and compliance services and one thing that I’ve noticed over the years is that those businesses that are not afraid to ask for our assistance AND implement the strategies that we have suggested are the ones that have grown from strength to strength. The other BIG factor is to not over capitalise when starting the business. We’ve unfortunately had clients who come to us and having spent thousands of dollars setting up their business and to top it off they didn’t get any ADVICE needed BEFORE embarking on their Entrepreneur journey. This is one of the main reasons WHY start-ups FAIL!
Instead of sitting down and sharing their ideas with their Accountant, they set-up their business without QUALIFIED advice. And…I know I get it. You probably don’t trust your existing Accountant with your idea as they might think you’re crazy (not that I’m saying you’re crazy) or you just don’t have that kind of relationship with your Accountant, which irritates me to be honest because there are Accountants out there who feel that business advice is a one size fits all situation instead of tailoring a solution that will actually help you! I guess that like anything in life, not all Accountants are created equal.
So, finding one that actually gets you…. gets your struggles because he or she has gone through the same struggles as you is rare, but they are out there. You just have to keep looking and don’t be ever afraid to break up with your existing Accountant (which is I know is hard sometimes).
So going back to the question “why businesses fail?”
I believe it’s a number of factors. From not planning the business right from day one, to overspending, to not budgeting for tax, to simply not budgeting at all, to not getting the bookkeeping right, to not developing a business plan, all of which should be covered by qualified advice.
If I could offer one piece of advice; that advice would be to find a qualified Business Advisor that can actually help you navigate the pitfalls of running a business. Someone that has your back and understands that cash flow is king; understands that your personal spending habits have a direct impact on whether your business succeeds; understands that making a profit and paying taxes is actually a good thing especially if you ever want to get a loan from the bank; understands that your success is their success; is not afraid to tell you as it is (even when you probably don’t want to hear it but you know you need to) and lastly, understands your business and has the skills, passion and qualifications to take your business to the next stage, whether that be growth, restructure, or your exit.
Getting the right advice at the beginning sets a solid foundation for your business and your future.
Charisse Russell is a Chartered Accountant with over 17 years’ experience in the profession. She is the founder and Director of HKS Russell and Entrepreneurs Accountant. Charisse is passionate about helping her Clients understand the story behind their numbers to make informed decisions.
She is backed by an amazing team who are changing the Accounting profession.