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“We are not going to make payroll this week” says someone from the accounting team to the entrepreneur(s) running the business. “WHAT! How the #$*! did that happen?” is the response followed by a series of emotionally charged words that would make anyone listening feel very awkward 😳.
Believe it or not this conversation is not unusual. In fact, any company that is growing and reaching new levels of revenue will most likely have a conversation like this a few times on their journey. Conversations like this usually lead to more conversations about the broken parts of a business that result in cash not being available to meet obligations.
But broken businesses can be fixed.
Why do businesses break?
Starting, operating and growing a business is no easy feat. It takes a lot of work to get a business through the various stages that are required to reach success. Assuming a business can get through the start-up stage and build a team that handles the daily activities involved in servicing customers, a business inevitably will hit a moment where things begin to fall apart. This happens because a business gets built as it grows. There is no pre-planning, checklists or instructions on how to grow a business. There are concepts and good practices that you can learn about but the truth is that every business is unique and requires the same amount of unique insights to help it grow. A business that goes from $0 – $10,000,000 will find that it needs to re-tool itself if it wants to grow to $50,000,000 or more. The old adage “you don’t know what you don’t know” could not be more true for growing companies. Generally speaking, businesses don’t break on purpose, they break by accident.
What got you here doesn’t get you there
In my experience, entrepreneurs and business owners tend to get very frustrated with the folks on their accounting team. When their business was started they did whatever they had to do to make sure the money they were earning was used in the business according to what made logical sense to them. At some point accounting people join their team and begin using words and processes that they don’t understand that leads to intense moments of frustration. Issues will go unresolved as the accounting team will relent and simply give the entrepreneur what they are asking for even if it is incorrect. This leads to a break down in what should be solid processes that keep the business on track according to widely accepted business practices. A business becomes broken when processes aren’t being used or working to help the entrepreneur or business owner understand what decisions and choices have to be made to avoid problems.
So what do you do?
If your business is broken (or if you think it is) the first place to begin is to isolate the problem. Do customers still want your product or service? Are your sales increasing or decreasing? Are your margins shrinking or growing? Where is the cash in your business going? Are your expenses increasing or shrinking? Question every aspect of your business until you determine the problem(s). Lack of cash is not the problem. Lack of cash is the result of a problem. You have to spend time figuring out why your business doesn’t have cash and then get work fixing the problems. In the course of doing this you may have to fight through calls from the government, creditors and/or upset customers but if you know what is broken and have plan to fix it the pressure will ensure that your business delivers the results it needs. Some circumstances merit talking with a bankruptcy trustee if your business needs temporary relief from legal action being taken against it. If your business falls into this category it won’t cost anything to have a trustee discuss your options with you.
Your business is not that special. All great business go through tough moments and the victories of yesterday won’t get you through the battles of tomorrow. If you worked this hard to get this far you owe it to yourself and the people that have believed in you (including creditors) to go the rest of the distance with your business.
Take our free quiz to see if your business is healthy by clicking here and get in touch with us if you want to chat about your business.
You should visit mlenow.ca because every business needs access eventually needs access to money.
