Is the practice of business finance too old fashioned for energetic start-up leaders? Or can new SME leaders learn the tricks of the trade that make companies profitable? At Skipton Business Finance, we believe they can.
For a long time the world believed that “you couldn’t teach an old dog new tricks”, meaning an incumbent would always be stuck in its ways and unable to change.
Science proved this otherwise for individuals where we hear stories of older people learning about new languages or new technologies.
And it also happens with old businesses too who develop new ways to appeal to new audiences.
But does this work the other way round? There’s a belief that new businesses with new ideas are great at disrupting markets, but not so great at fundamental business and finance management.
Focusing on more than sales
According to Forbes, one of the top five reasons why start-ups fail is their “inability to nail a profitable business model with proven revenue streams”,
Sometimes start-ups focus purely on sales as a metric for success. Sometimes they focus on a few incomings and outgoings, but still judge cashflow through gut instinct.
But they’re often focused on the ‘new’ rather than the ‘old’.
Being excited by new ways of doing things
As a new business leader it is easy to be swayed into thinking that your business is doing well when you’re getting new clients, new projects, new staff and regular praise.
It’s also easy to think that this is due to the exciting new way of business that you’ve developed and so you should always do new things to be successful.
But to get a strategic perspective on business success you need to also look at financial health. You need to monitor cashflow. You need to understand working capital is more than just a business overdraft or a loan.
And that’s not as exciting as your new product or service.
Financial health is not as exciting as sales figures or a new big deal. Financial health isn’t exactly something you can shout about in the local business newspaper.
But it is a really useful way of monitoring business success. It can help inform strategic decisions and can help warn you when you’re about to struggle.
It’s just about balancing old tricks with those dazzling new tricks.