Innovation and enterprise blog

15 posts categorized "Finance"

16 July 2014

Book review - Understanding your business finances by Johnny Martin

Understanding your business financesIt is something of a cliché to say that most new business fail due to cash-flow problems. But it is also a truism.

Johnny Martin has made it his mission to get business startups to understand how their business finances work, or to use his words, “take control of your cash and manage your business with confidence”.

In addition to his monthly workshops in the Business & IP Centre at The British Library he has now published a book. Understanding your business finances is part of the ‘Essential Business workbook’ series published by Cobweb, who also produce the essential Cobra database.

Johnny understands how most people starting a business are intimidated by the financial aspects and often hide their heads in the sand.

“Many people come unstuck when they start a business because they don’t know what the numbers are telling them. Some don’t even have any numbers to work with! Others manage to get through the early days create a really successful business, only to be ripped off by a so-called business partner who is ‘dealing with the money’. (And believe me that happens a lot.)”

Johnny has worked hard to ensure the language, writing style, fonts and page layout of the book are as clear and simple he can, to make this vital knowledge as accessible as possible.

The content is divided into twelve chapters with a worksheet in each one, to turn the theory into practice:

  1. Introducing the three key financial reports - Cash flow forecast - Profit and Loss report - Balance Sheet
  2. Understanding the business model
  3. Forecasting sales - researching your market and competitors - setting your process to make a profit
  4. Getting to breakeven - fixed and variable costs - calculating your breakeven point
  5. The profit and loss report (the P&L)
  6. Introducing VAT
  7. The difference between cash and profit
  8. No one goes bust with money in the bank - monitoring and understanding your cash flow
  9. Balance sheets and accounting principles - understanding the balance sheet
  10. An introduction to financing your business - what type of funding is suitable for your business - sources of business finance
  11. Day-to-day accounting in your business - who can help you with your accounting
  12. Putting all you’ve learned into practice

Johnny_Martin-300pixHHe has also include a ‘Jargon buster’ at the end covering topics from Accrual accounting to Working capital.

I will end this short review with another cliché, this time from the publishing world. ‘Everyone should read this book’. Except in this case it really is true. If everyone starting or running a small business were to read and understand this book, the number of business failures would be significantly reduced. Resulting in a stronger economy and happier entrepreneurs and their families.

“You CAN do this stuff. It’s sill okay to delegate finance to accountants or key members of staff, but don’t abdicate the responsibility completely. No one is going to look after your interests better than you.” Johnny Martin

 

Neil Infield on behalf of Business & IP Centre

11 July 2014

How to avoid business failure

The statistics for small business failure make for grim reading. It’s a fact that fewer than four in ten businesses survive past the first critical three years of trading to become sustainable. That’s a lot of time, money and ruined dreams that could so easily have been avoided.

I’ve worked with many businesses here at the Business & IP Centre from early stage to high growth and have found that there are some key things to do at the early stage that will significantly reduce the odds of failure and even grow to real success. In fact our research has shown that using our resources and networks will reduce the chance of business failure to less than one in ten.

Individual Female Tablet
Firstly, one should remember when starting that the most important asset in the business is you. So it’s vital that you’re realistic with yourself and have your feet firmly on the ground. No matter what type of business you start or invention you want to exploit, it goes without saying that just because it’s your idea, it doesn’t mean it’s a commercial idea and will make you money.

So you need to be vigilant and do everything you possibly can to minimise risk, but how?

There’s no shame in knowing what you don’t know.  As a business owner you will need to wear so many hats and have a wide skill set that it can feel daunting. But being an all-rounder doesn’t mean you have to be brilliant at everything either (not everybody with sales skills makes a good marketer) but you sure need to understand some basic principles and practice for a lot areas.

A keen desire to pick up as much information and advice along the way is crucial. Thankfully you aren’t alone. Many at the Business & IP Centre have benefitted from accessible, down to earth workshops that tell you the most important things you need to know, be it marketing or finance.

You can Get Cashflow Confident or grow your business online with our Marketing Masterclass Perfect for anyone exploring the possibility of a new business is our Start-up Saturday workshop  too.

Workshops are great opportunities to share experience and meet others too. You can start to create your own network of contacts to help you in all the areas you need to know. It may well become your lifeline.

Secondly one should find out as much as you can about the market you’re moving into. Proper research is your gateway to better opportunities. To have a serious business someone needs to buy your dazzling new product or life enhancing service and it sure helps to know whom. Market research does just this by identifying consumer profiles, average spend, size of the market place, threats, opportunities and forecasts. All this is information gold-dust at an early stage that will save you so much time and money in the long run, even if it’s as simple as helping to guide you on the right marketing strategy.

Published content by some of the larger researchers out there is beyond the budget for most early Individual Male Laptop stage businesses. The Business & IP Centre has taken this problem out of the equation by making freely available to its walk in users over £5 million worth of quality research on all major sectors and a good many small ones too.  What’s more our Information Specialists in the Centre will point you in the right direction and show you what you need to know.

And thirdly one should ensure your new venture will need to be as safe from risk as possible. Getting the right legal structure and necessary insurance in place at an early stage will save you huge bills and endless stress later. Understanding what you need to do doesn’t have to be as complicated as it sounds. A database in the Centre called COBRA (Complete Business Reference Advisor) tells you in plain English many of the legalities and insurance issues you’ll need to address among other topics.

One should always consider what Intellectual Property there may be in the business too. Our Intellectual Property workshops and advice help to break down and explain how you can address this important asset in any business.

Group 7So addressing these issues will ensure your first step is a sure one. Of course there’s much more to build on from here but these issues are absolutely fundamental to the viability of any venture.

Finally, I would suggest not throwing all your eggs in one basket. Don’t quit your job just yet especially if you haven’t even had a single sale! It’s good practice to test and refine your proposition with a few customers that helps to prove the concept.

Remember, there’s never a shortage of help and advice to guide you, so help yourself to reduce the odds of failure.

 

Jeremy O’Hare is a Relationship Manager for the British Library’s Innovating for Growth programme, which provides £10,000 of fully-funded and tailored advice for businesses looking to grow programme.

ERDF Logo Portrait Colour Web

 

 

07 July 2014

Confusion costs cash!

Jm webOur resident finance expert, Johnny Martin explains the most common finance mistakes that he has come across.

One of the hardest things when you are starting or running a business is getting to grips with the financial jargon and of course the numbers!  Too many business owners think that it’s OK to muddle by and that somehow it will be alright on the night.

As a result, many don’t start because they can’t raise cash, or they start and crash and burn because they run out of cash or they start and create a really successful business with the help of a (so-called) business partner who goes on to rip them off so they lose out on their cash! You wouldn’t believe the number of times at my workshop at the British Library, people say that’s what happened to me!

 So what causes this confusion and how can you make sure you understand your business finances and make sure you don’t waste cash? 

To start, let’s cover THE biggest cause of confusion and especially confusion between business owners and finance people – why is profit not the same as cash?!  Well if you were running a very simple fruit seller business, buying on the wholesale market, selling on a street corner, and chucking out unsold fruit at the end of the day – then the increase in cash in your pocket would be the same as profit. 

BUT as soon as you start selling on account, buying on account, having stock, buying equipment then cash and profit are different in the short term. 

This explains why you have two reports – the cash flow looking at cash and the profit & loss report which matches income and expense when they happen i.e. based on activity.  The profit and loss is there to help you assess profitability or viability – can you sell for more than your costs?

If you didn’t match income and expenses in the same period you would never know your true profits.  For example you hire a freelancer but they don’t invoice you at month end, you would still make a provision for these costs in your management costs. 

Otherwise you would understate freelance costs in the month when they happened and over state in the month the invoice came in or indeed when it was paid…This is known as accruals accounting – matching income and expenses based on activity.

To help overcome this kind of confusion I run a regular workshop at the Business & IP Centre called Get Cash Flow Confident.  If you come to the workshop you also get access to my online training video Talk Money and a 5 year forecasting template. 

Whatever stage you are at – please, please, please don’t ignore finance.  Successful businesses understand their numbers, know their numbers and act on them.  By all means delegate finance but don’t abdicate responsibility – it is just too important.

09 May 2014

Business book reviews from Dr Stephen Fear

Ambassador Stephen
Dr Stephen Fear, our Entrepreneur in Residence and one of the Centre's Ambassadors shares the latest about his series of business book reviews held in the Centre.

 

Books have always formed a big part of my life. Growing up I was a voracious reader, something that has never left me.

Last year, it was suggested to me that I should consider hosting a book review located at the Business & IP Centre, focused on business books.

I started to think about how to do this in a way which would benefit entrepreneurs and small business owners using the Centre, and possibly a much wider worldwide audience online.

My first attempt at getting it right had its challenges due to the UK being hit by heavy snow! Our film crew couldn't get into London so we ended up doing the practice run in a penthouse apartment I own in Bristol with a hand held camera. It was all very much a practice run, but we put it on YouTube anyway, exactly as it was. Clearly it was much too long and the sound was poor but it was our first try so I hope we can be forgiven for that.

Thankfully we have progressed, and the review is evolving into something that I hope will assist the huge community of UK entrepreneurs develop their businesses.

Each month I intend to review two books which I have read and which I feel are relevant to the SME community. Where possible I will have a guest author on the show. In March 2014 I interviewed Susan Gunelius, successful author of many books including, The Dummies Guide to Blogging and Social Media.

So what's next! Well, in July I will be focusing on two more books, the first is essentially a work manual written by chartered accountant Johnny Martin which explains how to raise capital and manage cashflow for SMEs and is called 'Understanding Your Business Finances" and the second is a book by Rasheed Ogunlaru, called 'Soul Trader' which focuses on getting your mindset right for success.

Although very different, in that one concentrates on hard facts, and the other on a rather more spiritual aspect, both are important for anyone seeking success in business. Unless you can clear your mind and focus, absorbing the information from Johnny Martin will be tougher to take in.

Have a look at some of the previous reviews and make sure you keep an eye out for the next one!

If you have a favourite business book that you would like included in a future review, let us know via Twitter or Facebook.  I will do my best to read it and review it in future programmes.

09 December 2013

Helping to make a success story - Children's Qur'anic Pop-up Book

Elephant_imageCrowdfunding is all the rage these days, as it has proved a real alternative route for funding a new idea or product.

The current top three are Kickstarter, Indiegogo and RocketHub, with new players appearing almost daily.

So I was not surprised to find that one of our customers had taken this approach to get funding for her Children's Qur'anic Pop-up Book and 3D app. Hajera Memon is the Managing Director of Shade 7 Limited and has launched their funding campaign this week on Indiegogo.

I don't really need to tell you too much here about the project to fund their first book Story of The Elephant: Surah Al-Fil, because the funding page is pretty comprehensive. But their aim is to become a global, multilingual publisher of premium pop-up Qur’anic educational story books and digital apps that help children learn about Islam in a fun way.

It was great to hear that Hajera was invited to the Small Business Saturday launch event at No. 11 Downing Street in early December:

I had the amazing opportunity to meet Chancellor George Osborne and show him the pop-up book – which he really liked!

Even nicer was to read her comments about the Business & IP Centre:

I would also like to take this opportunity to thank you all so much for your extensive time, patience and support with the development of this project and for getting us to this exciting stage!

You’re a really special group of people whom I’m very grateful to know and you make me feel so pleased with the decision to try and join the entrepreneurial world, regardless of how things turn out! You’ve all added your own special contributions to my start-up journey and I really wanted to say thank you.

It is with your encouragement that I have had the strength to continue with each stage of the business and I really appreciate the efforts and invaluable advice you’ve all shared with me throughout. I pray this venture is successful and will be something you can all be proud of!

 

 

Neil Infield on behalf of the Business & IP Centre

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