Tag: business acumen

Why do so many small businesses fail in their first year?

There is no doubt that the environment for business is tough, with 50% of small business expected to fail within 5 years. Many of the adverse factors affecting business, such as tax and bank lending are out of the operational control of business owners and managers.  So in order to survive, small business needs to make the most of their resources and ensure that they have the knowledge and skills to survive.

Also listed among the common reasons for the failure of small business are:

  • A lack of business acumen,
  • Poor financial planning,
  • Bad cash flow management.

To survive, business owners and managers of small enterprises must be able to rise above the minutia of day-today business decisions and see the bigger picture.

They must understand how the cogs of business fit together to impact profitability and cash flow, and they must be able to assess the impact of their potential decisions on the success of the business.

To truly understand the business, owners and managers have to understand how their business makes money – in other words, how it generates sales, maximises profit and manages cash. They need to understand that every action taken and every decision in each area of their business will impact these ultimate measures of business success.

Business owners and managers of small enterprises are typically forced to develop this business acumen on their own. They are hands-on with their businesses, having to make all the decisions as they go along, whether good or bad. As the statistics show, they either learn from their mistakes or fail.

Common problems for SMEs

Small and Medium Enterprises (SMEs) are often confronted with problems that are uncommon to the larger companies and multi-national corporations.  These problems include the following:

  • Lack of Credit: SMEs frequently have difficulties in obtaining capital or credit, particularly in the early start-up phase.
  • Profit vs Cash: Understanding the difference between profit and cash.
  • Cash Flow Management: Protecting and enhancing their cash flow position.
  • Financial Statements: Understanding financial statements and their use in making better business decisions.
  • Survival, stabilisation and planning for the future.
  • Working capital, investments, financing business assets or assistance with international trade.
  • Restricted Resources:Their restricted resources may also reduce access to new technologies or innovation.
  • Resistance to Change: Many of the employees in SMEs started from the ground up after working with the company for many years.  Some of them are often holding supervisory and managerial positions. These employees may not be IT literate and often have high resistance to the changes in the working process that they are comfortable with after many years.
  • Lack of Procedure: Most SMEs do not have formal procedure or often these are not documented.  Furthermore, there is tendency for these procedures to change frequently.  This makes it difficult for third parties and newcomers to understand the existing business practices.
  • Lack of Managerial Training and Experience: Managers who are promoted from the rank and file may not have had the exposure or training needed to perform as leaders and managers of people.
  • Manpower: SMEs are frequently fire fighting and suffer from shortage of manpower.

Brightbolts supports business by raising the financial literacy and business acumen of managers.

Brightbolts are specialists in helping managers and organisations raise their levels of financial literacy and commercial awareness. Our suite of customisable Finance for Non-Financial Managers eLearning courses are used by leading global organisations to equip their managers with the skills, understanding and acumen needed to be financially fit and ready for the challenges of running successful businesses.

Or contact us, to see how we can help you and your organisation…

[share title=”Share this Post” facebook=”true” twitter=”true” google_plus=”true” linkedin=”true” style=”color:#000″]

How financially fit are your managers?

Most people in management, start their careers as specialists and high-achievers from within the business. Their potential is obvious, so they are promoted through the ranks. But, being an amazing and innovative engineer or a big-hitting sales person does not mean that you will naturally be a great leader.

Many career paths just do not provide the necessary exposure to managing people, budgets and to understanding the nuts and bolts of business that are essential to becoming a successful manager.

From the outset, managers are expected to be decision makers and leaders, this is a heavy burden to carry when you do not have the necessary commercial awareness to understand the full implications of the decisions that you are making.

Becoming financially literate and commercially aware should be one of the first development needs addressed by all managers.

Managers need to understand how a business makes its money, manages its cash, maximises its profits and how each person, role and function can positively influence business performance.

Managers need to own a fundamental foundation of financial literacy, or an understanding of the financial statements and an operational understanding of how they can best use this financial information to make decisions that positively impact on the success of the business.

Being commercially aware is the difference between being able to read and understand financial statements and being able to read, understand and interpret this information to make informed business decisions.

When commercial awareness is embedded in an organisation, its managers begin to ask more informed questions.

Questions that take into account the impact of potential decisions on different parts of the business and also how the outcome of their decisions will finally impact upon the company’s financial performance and results.

  • Has the cost of production gone up? If so, why?
  • Have we changed our pricing model? If so, how has that affected our margins?
  • If our production unit costs have gone up, can we better control our production processes or service delivery?
  • Is there a way to produce a greater product volume at the same cost?
  • Can we raise prices, yet still provide value to the customer and remain competitive?
  • Are we creating value for our shareholders?

When questions become more informed, the right decisions can be made.

Brightbolts are specialists in helping managers and organisations raise their levels of financial literacy and commercial awareness. Our suite of customisable Finance for Non-Financial Managers eLearning courses are used by leading global organisations to equip their managers with the skills, understanding and acumen needed to be financially fit and ready for the challenges of running successful businesses.

Or contact us, to see how we can help you and your organisation….

[share title=”Share this Post” facebook=”true” twitter=”true” google_plus=”true” linkedin=”true” style=”color:#000″]