20/07/2010

By Colin Mills, CEO, The FD Centre

‘Financial fear’ for a lot of business owners and entrepreneurs tends to creep up from unexpected quarters. It’s often unforeseen because it can affect an expanding business as easily as one that is failing. This fear is not solely the province of a business that’s in trouble - — neither the ‘hero’ nor the ‘zero’ business is immune. When a business is a runaway success and growth is seemingly endless, keeping financial control can still be a problem. This is because most entrepreneurs with great business ideas, innovative products and a powerful selling capability are often limited in their financial skills.

It’s frequently true that entrepreneurs rarely understand how to handle the financial management aspects of fast growth. They are often unable to articulate plans and proposals in terms that banks need to hear. They rarely forecast and manage cash flow effectively. And they are usually without a skilled financial adviser who understands their business. This results in a rising feeling of uncertainty because the entrepreneur is on unfamiliar ground.

The energy and enthusiasm, which drove them at the outset starts to falter as financial concerns, for which they have few answers, take up an increasing amount of their time. As a result, the driving force behind the business is increasingly taken away from running the business and dragged into managing finance — albeit rather badly. It does not take long before the business starts to suffer from the entrepreneur’s inattention.

When uncertainty turns to doubt

Unlike successful business owners, those facing hard times hardly take their eyes off the problem. They are consumed 24 x 7 with survival. In some ways they are more focused than the runaway success. Yet both are prone to the same problem progression. That is because in many cases, both hope that the problem will eventually go away — it won’t.

Instead of simply ‘going away’ the problem will just get worse; successful business or not. The process that begins with a little edge of uncertainty soon escalates in the mind of the previously ‘driven’ entrepreneur and he begins to doubt himself. This may sound improbable but unfortunately, it’s true. It happens and the results are not pretty.

The real issue is the escalation of the problem both in real and perceived terms. In real terms the business will suffer. The financial problems will not go away and whether the business is a hero or a zero, uncontrolled, unmanaged finances can have the same impact. The hero business that is growing out of control could run off the rails and the zero business that is suffering could vanish without trace.

Just because an entrepreneur is experienced retailer, restaurateur, product specialist or inventor does not mean he can acquire the skill set needed to manage the finance function.

As the largest provider of part-time Finance Directors in the UK, the FD Centre can help businesses achieve their strategic objectives. To find out if your business could benefit from a FREE Financial Health Check and receive valuable advice for your business’s financial planning, visit www.thefdcentre.co.uk

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