Are you on firm foundations?
Building a business on firm foundations can help any business owner sleep better at night… What are they though, and how do you get there?
Watch this to find out more!
Would you like a copy of the ‘Foundations Checklist’ mentioned in the Episode above?
Hi and welcome to this, the first episode of BaranovTV of 2019, so Happy New Year!
As you know, BaranovTV is designed to demystify the world of accounts and tax and to help your business grow.
Being the first episode of the new year I’m sure you’re all buzzing with resolutions and all of the things that you’re going to change about your personal eating habits, exercise habits, all of those sorts of things. But this episode is going to be a resolution-free zone!
Instead I want to talk to you about foundations.
We all know that you never build a house on dubious foundations, and really a business should be no different. What I want to talk to you about today are the sorts of things that if you have in place they will enable you to sleep well at night and they will enable you to park all those sorts of worries and concerns and be able to focus fully on moving the business forward and achieving what you’re setting out to do.
So what do I mean by foundations?
Well, people set up in business primarily to provide a good living for themselves and their family, and then over time a business grows and there’s staff and employees involved, and there’s other responsibilities and commitments that come into play. It can become quite concerning when you look at the volume of those responsibilities and you start to factor in all of the things that could go wrong. So what we want to think about today are the key things that enable you to provide that security to your family, to your lifestyle and to your employees, to your team and your business to make sure that all of those are able to survive comfortably should the worst happen. And by the worst I mean things like unforeseen serious illnesses, accidents, natural disasters, loss of a key major customer, those sorts of things.
All the really cheery things to talk about in the new year!
So first off you must have in place a disaster recovery policy.
The types of things that you will do, and that your team will know how to do if the worst should happen. You can have a look back if you’re not sure what a disaster recovery policy is. Have a look back at Episode 10 of BaranovTV, because we did talk about that then.
Next come your Personal Finances.
- We talked briefly before about making sure that you know what you want to be able to take out of the business personally. So you need to make sure that you’ve got your personal finances taken care of, and that’s making sure that you are one of the 32%, which is a very small percentage, of business owners who are actually saving and contributing to their own futures. The balance are not. You want to make sure that you are one of those people, that you’re putting money away for your future so that at some point you can hang up the business keys, the hat and say no, actually now I can move on and I can retire; I can enjoy the fruits of my hard work. That includes things like savings and investments. You may want to have a different combination of pension, savings and investments given the way things have been going recently.
- But to make sure that you’re looking at things in the right way, you need to have a really good financial advisor on your side and you need to be able to make those contributions. You can start with a small amount and build up; it doesn’t have to be major amounts straightaway.
- You also need to make sure that personally you’ve got a cash budget, I’m sorry, a cash pot to live off for three months, ideally six, so that if you couldn’t take any money out of the business you can survive.
Then we’re on to Business Finances.
- This is a lot more complicated than personal finances, but very similar in that you want to make sure that you’ve got that cash pot for a minimum of over three months overheads, ideally, to include a quarter’s average VAT amount and one year’s corporation tax amount so that you’re building that buffer the whole time and putting yourselves on a firm footing.
- Obviously I would say regular and timely management information or management accounts, so you can make informed decisions and start to see if things are slowing down, if things are taking off.
- Make sure you’ve got a cash flow monitoring process set up and also that you’re looking ahead so that you can see where the gaps might be coming and where the challenges might arise.
- That you’ve got a debt collection process that actually happens. Make sure that you’ve got that routine set up, and then debt shouldn’t become a problem for you. There are lots of different ways of doing that, so if you need a hand do get in touch.
- Make sure that you’ve got Budgets in place, which we talked about in Episode 42, that can show you how to spot the gaps that you may have coming up and see how things are progressing.
- You also need to think about making sure that if you’ve got big plans for 2019 that you’ve got enough capital to actually sustain those and to finance those, because the last thing you want to do is start a massive marketing push for example and realize that you haven’t actually got the resources to serve those customers. You’re better off deferring the marketing activity, getting everything in place first, and then going. Make sure you’ve got a Business Plan for at least a year in advance. Beyond that with the rate of change and the way things are looking with Brexit and all those sorts of things, it may not be worth spending the time, but do make sure that you’ve got a good business plan for the next 12 months.
- Make sure, as we talked about in Episode 23, you’ve got a Shareholder Agreement in place. It can really make a huge difference if you’re a co-director or a co-shareholder and things go wrong later. It’s an awful thing to consider when you’re good mates with somebody and you’re working well together, but you never know what’s around the corner.
- Make sure too that you’ve got adequate Terms and Conditions for your business. If you sell domestically or provide services domestically or commercially, so business to business or business to consumer, you might want different terms and conditions. There’s no reason why you can’t have that, but do make sure that those are reviewed and approved by a solicitor. What you don’t want is to rely on those terms and conditions and have them thrown out if you do need to take somebody to court or rely on those terms and conditions.
Moving on, we need to think about Insurances.
You must make sure that the business and you personally have got insurances in place that cover you for what you need.
- So obviously we’re talking car insurance, which most people will have I hope, but also things like critical illness cover. If you can’t work for a period of time what will happen, and make sure that there’s something in place for that.
- Professional Indemnity Insurance, if that’s relevant; if you’re giving advice to somebody that they’re going to rely on, they may be able to come back to you and say, well, hang on a second, that was wrong. So make sure that you investigate that.
- Make sure that your Office Policy and any contents cover is adequate, and make sure that you’ve got the right Employees Liability cover, etc.
- A good broker potentially is worth their weight in gold!
- Someone else who’s worth their weight in gold as you develop a team is an HR advisor who really knows their stuff, but is based in the real world. So who knows the legislation but will help you and actually listen to the problems and help you implement the rules in a realistic manner.
- You need to make sure that you’ve got a clear communication process with your team and they understand what the goals are and where you’re trying to take the business.
- Be careful that you’ve got your processes documented. Now we’ve talked in the past about a system called Sweet Process. There’s also a system called UseLoom that we’ve come across, which is entirely free, and essentially just enables you to video what’s going on on your screen and speak at the same time. You can describe what you’re doing when you’re going through a process, so there’s no formal documentation required, but someone else can watch that video and follow what you’ve been doing and why. That gives you a massive amount of peace of mind if there’s a risk that somebody could be off unexpectedly for a long term.
- Finally, and I’m not quite sure why I put it at the end because it’s very important, is IT. You need to make sure that your backups are done regularly and they’re checked to make sure that they work.
- Your security is right, as I talked about in Episode 41, a very, very scary episode but it’s very worthwhile having a quick watch.
- Also make sure that you’ve got good IT support that you can call on if you have any trouble, that they know how you work and they can support. We moved IT providers some years ago when we moved from Windows to Macs to make sure that we had the right support available should the need arise.
There’s lots and lots different Foundations factors there, and I’m sorry this is getting quite a long episode, but I think that having the foundations right can really give you as I said before the head space and the peace of mind that actually everything will work and everything can continue. Some of those things will be very quick to implement, so potentially finding an HR advisor might be quite speedy. But making sure, something I didn’t mention, that your contracts are right will take time.
The other things that will take time is building those buffers of finances, but again, really worthwhile doing.
What we’ve done is we’ve collated a lot of these points plus some others into what we’re calling our ‘Foundations Checklist‘ and if you would like a copy of that to give you a checklist to tick through and see where your Foundations gaps are, then please drop me an email. I’ll put my email address at the bottom of the screen. Drop me an email and let me know that you’d like one, and I’ll pop a copy out to you very happily.
You need to know where you stand, and then if you need to know who you can speak to about any of those missing gaps, those missing Foundations, then do get in touch because we know a lot of people and we can make some introductions or just at least give you some contact details and some options.
I’m going to leave you with that. It’s again as I say a very long episode, sorry, but I hope it’s really helpful. I’ll see you all very soon.
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