Running out of cash is the main reason young businesses don’t succeed. That’s why it pays to start thinking about the money side of things from the very beginning. Or bring in an accountant pre-launch, who really ‘gets’ your business and can work alongside you from the outset. Here are some tips on artful accounting and how to find a made-for-you accountant…
There’s more to hiring an accountant than just paying someone to do the ‘boring bits’. Your relationship should be more of a partnership: a good accountant will be like an extension of your business.
An accountant should probably be your first hire because so many other aspects of running your business will flow on from there. But don’t rush into choosing someone – talk to your friends and business contacts to find the match that’s right for you.
Finding the right fit for your business
Start looking for an accountant pre-launch as they can help you think ahead and avoid rookie errors. Before you meet up, get your business plan down on paper (even if it’s just on a single A4 sheet or the back of a napkin). This will provide the stimulus for your first conversation and it’s a good way of gauging your compatibility to work together.
A sign that you’ve found the right accountant is that they’ll be as enthused about your business vision as you are (not standoffish or indifferent). During your first chat, they may point out some aspects you hadn’t thought of such as important admin or tech details.
Tips on creating a finance business plan
When you’re drafting your finance business plan, don’t be overwhelmed by unknowns – just start with the stuff you know and a lot will unfold from that. For example:
- The first figure to get down on paper is the amount you need to live on each month. So think about your personal outgoings like your mortgage, bills, groceries, etc., (factoring in tax) and calculate the budget you’ll be comfortable with.
- Next, work out how much money you’ll need to get your business off the ground. Think about your setup costs including any equipment or materials you’ll need to buy or fees you’ll need to pay (e.g. for website designers or other freelancers).
- Now consider what your ongoing running costs might be in your first few months. Will you need to keep some of those freelancers on? Hire additional people? Rent a studio or office space?
- How will you find the money to start the wheels turning? Do you need a lump of cash upfront that you can continue dipping into during the months following your launch? Or do you need to keep your day job and treat your business like a ‘side hustle’ initially?
Once you’ve answered the above, you’ll have a rough and ready (but infinitely better than nothing) plan that maps your finances to your business vision.
Managing your cash as you grow
Go go go
When you’re first starting out, you’ll probably be ruthlessly focused on keeping costs down, and trying to do most things yourself to avoid paying other people.
Grow grow grow
Hopefully, you’ll soon reach a point where your product has traction (i.e. customers are buying it) and your business is starting to make money. As your business builds, you’ll reach a defining moment when customers are buying your product as fast as you can make it. Congrats – you’re reaching the right people with the right product at the right time and your business has truly arrived. But wait, there’s a potential hazard up ahead…
Uh oh
As your business gathers momentum and everything’s speeding up, the orders are coming in so fast, you may be struggling to manage fulfilment. If so, what felt like a sense of elation may be replaced by a creeping sense of dread.
Time to let go
This is an indication that the time has come (or is overdue!) to let go of trying to do everything yourself – and start delegating. When your product is selling out faster than you can make it, this may seem like a ‘nice problem to have’ – but disappointing your customers can cost you their loyalty and weaken your brand. For this reason, it’s incumbent on you to spend some of that money your business has been accumulating to hire people to help you (and prevent supply-and-demand hiccups).
How to plan ahead and not get caught out
This exercise may be useful to help you get the timing right so you can flow with the grow:
1. Draw a table with two columns.
2. In the left-hand column, make a bullet point list of all the elements that currently make up your role in your business.
3. In the right-hand column make a bullet point list of the elements that will comprise your role two years from now.
4. Compare the two (it’s likely that the list has shrunk by about 75% in the right-hand column).
5. Now look at the elements in the left-hand column and start identifying them as, say a ‘fulfilment and logistics’ role or a ‘general admin’ role, etc. This will help you envisage who you’ll need to hire when the time comes to start delegating.
6. By planning ahead in this way and interviewing potential recruits sooner rather than later, you’ll be in a better position to flow with the grow.
This how-to guide was inspired by one of our Zoom Dives with Nick Maynard, Director at Practice London Limited, a boutique professional services firm, built to help founders of creative businesses start, incubate and scale ideas.
Our Zoom Dive events are deep-delving discussions between our founder, Carolyn Dailey, and handpicked creative business experts. You can listen to Carolyn and Nick’s full discussion here.
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Meanwhile, feel free to plunder our Knowledge bank for more inspiration on accounting.