18,000 Entrepreneurs starting a business by April will succeed.

Every year between January and March some 120,000 new companies are starting a business. Fifty percent of these new companies have a single shareholder and director. They all start a journey which will be successful for 30% of them in the long term. One4 Tax and Accounts Ltd Chartered Accountant will show that managing your cash flow in 3 simple steps can make all the difference.

Contrary to popular believe the first year is not when most companies starting a business fail. Seventy-five percent of all businesses survive in the first year and of those survivors half drop out during the next six years.

Reference : Graph -Scott Shane, using small business administration data

The non profit organisation Small Business Administration lists from their research 7 key success factors:

1. Start for the right reasons

2. Good Management

3. Sufficient Capital

4. Location, Location, Location

5. Sufficient Planning

6. Sustainable growth and expansion

7. Have web presence

Their research shows you need to be successful in many areas to be a successful entrepreneur. However, there is one common area of failure, Insolvency Helpline UK states on their website: 

“50% of all failures are caused by cash flow problems”.

When starting a business many competing priorities need to be dealt with and Brad Rosser previously right hand man from Virgin’s Sir Richard Branson suggests in his start-up presentations that key items for success include:

• Paying a little bit more if it means you can spread-out payments

• Spending cash on items that bring in cash and not the back-office

My own experience shows that even commercially successful businesses can go under if cash is not managed properly:

 “During a statutory audit of a fast growing start-up, I discovered that the bank balance was depleted, although the accounts suggested otherwise. Then many unprocessed invoices were found..... Blissfully unaware seminar organisers were overspending, running down the cash and not making any money. The fast growing business was virtually bankrupt rather than beating forecasts. Indeed you can choke a successful business by growing too fast and not managing your cash flow.”

Ask a chartered accountant about maintaining your cash flow and he will explain you need to have a good set of accounts and that includes knowing your outstanding invoices/costs.

The three steps to manage your cash flow are to (1) common sense and (2) quality accounts and (3) to prepare a forward looking cash flow. Out of your projected cash flow you can determine if you need to look for financing or if you can manage it from your own cash flow. The best part is that by “playing around” with cash flow assumptions you can optimise your financing and therefore your profit. Three simple steps to manage your current and future cash flow and you are much more likely to succeed when starting a business.

Improve the odds of being successful in the long run:

Attend a monthly seminar on "starting a business successfully".

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