Despite findings suggesting that those with accurate financial information grow on average twice as fast than those with data three quarters-old, small businesses throughout the UK are not doing enough to stay up to speed.
From my experience, running a business is a pretty bumpy ride – so it makes sense to base decisions on the best possible information you can lay your hands on. If it’s four months old, which is what small businesses are looking to on average, then it’s going to be a pretty scary process.
Great businesses are built on great decisions, so make sure you know where you stand before diving into the deep end. Our research has shown that mental arithmetic and rough calculations are being used as a guiding light more often than genuine current financial information.
In excess of half of the owner/managers we interviewed take on big decisions such as recruitment or investing after scribbling out a few sums in a note pad and only with a few bank statements to do so with.
Furthermore, with business owners looking to keep costs to a minimum early on, the majority are using self-taught financial skills to prepare company accounts. While it is fair to say the leader of a company is best informed to make big decisions, a lack of a comprehensive picture is leading to a degree of financial uncertainty for today’s trailblazing entrepreneurs.
Business owners are making do with what they can get their hands on, and doing a fantastic job with it too. But an incomplete picture naturally creates uncertainty and means business owners are spending more time than they should have to trying to interpret their data.
As a bit of fun, we created a Business Finance Personality test. It asks questions such as how you work with your accountant, the ways in which you keep on top of your business finances and how you approach making investments in your business. At the end you’ll get a summary such as a “carpe diem” type entrepreneur, or a glass half full kind of person. Like I said, it’s a bit of fun but should provide a little insight into how you go about making decisions which could have a big impact on your bottom line.
It’s also an interesting examination into the different psyches of business owners. All approach decision making in different ways, but are generally after the same thing – sustainable growth.
Small business success comes from a mix of insight and bold-informed decisions. Precise information is central to a firm’s growth prospects, with those that prepare income forecasts growing by a third more than those that did not (nine per cent compared to six per cent) in the last twelve months.
Many entrepreneurs have the hard-won financial acumen needed to be successful – but too often it comes down to lacking the data and insights to help make truly informed decisions. Combining current data and real insights with small business smarts is the key to helping these firms supercharge their growth.
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