For Love or Money

Ignoring the risks.

And balancing those risks is an on-going challenge. No question. But company owners are playing a dangerous game when it comes to risk management and their own financial future.

Our latest study reveals that business owners are adopting an ‘all eggs in one basket’ approach to their finances by investing heavily in their business, while at the same time filling that basket with holes – including relying too heavily on a few stakeholders.

More than two fifths (42%) of business owners say their company could only survive for a week or less without them. A similar proportion (43%) confess to having a single major customer that they couldn’t live without, while over a third (36%) admit their biggest customer generates more than 40% of their monthly revenue.

Leaving your financial future at the mercy of a key member of staff, client or supplier, or indeed your own continual availability doesn’t sound like a sensible solution at the best of times, let alone in a post-Brexit business environment. So, what’s going on here?

When you’re trying to get your business off the ground, dedicating all of your time to one customer or supplier can seem like the most logical and financially lucrative decision. But as your company grows, so do the risks and many business owners fail to adapt.

The solutions seem simple – hire more staff, extend your supplier base and focus on attracting more customers – but who has time for this??

To manage the risks, we’re advising business owners to take a 2:2:2 approach to business planning post-Brexit, making the necessary adjustments to ensure they have a solid 2-week, 2-month and 2-year business plan as well as increasing their liquidity.

Finding time to think as well as ‘do’ is paramount. Business owners need to take time to look in the mirror and question what they are doing. Let’s be honest, you’re never going to make the right decision when you’re in a state of mild or extreme panic. Having a short-, medium- and long-term plan means you can handle any unexpected changes confidently and calmly.

Stop and think about your customers’ and suppliers’ financial stability – have you ever undertaken a credit check? Are they well-established leaders or are they lagging behind the competition and quickly losing market share?

Consider your broader exposure to certain business sizes, specific sectors or different markets. Your customer landscape may well have changed dramatically since you started up, and it will still be evolving, perhaps even quicker than before.

Look inside your business as well. Ask yourself, how would your business cope if a key member of staff decided to leave, or you fell ill or had to take time off suddenly to support your family for weeks or months?

For many business owners, both their own and their family’s financial future will be determined by their company’s success. It’s imperative to future proof now to secure your own financial future.

For Love Or Money? is based on a UK wide survey of business owners and reveals a terrifying degree of reliance on the business to provide for the owner’s financial future and the risks that business owners are taking. Download the report, benchmark yourself using our online tool and read our views to help kick-start your own plans.

Michael Davidson
Haines Watts