At some point you decided to kick on past the point where you employ staff and now, even in the working from home era, you most likely have people and premises as your largest and fixed costs.
You delegate work and responsibility to others and you can’t be everywhere. So, from a finance perspective, what do you need?
Break-even level of sales
Some months you’ll make a loss and it’s horrible. It might be seasonal – August and December can be low revenue months – or it might be that your business is under-performing.
In any event you need to know:
- Which costs are fixed (e.g. rent, permanent staff)
- Which costs are variable (e.g. costs of sales, pay-per-click, sales commissions)
- What level of sales will cover your costs, at which point you break-even
=> What is break-even analysis?
Cashflow
Cashflow is always important and it became more so when you expanded and started to incur higher costs. Every month in which you don’t break-even will lead to cash leaving the business and a sustained period of losses will lead to cashflow difficulties.
There are two types of business:
- those that are comfortably cash-rich and don’t need a cashflow model
- all the rest
If your business is in category 2 then you need a cashflow model – now!
=> My cashflow is a mess and I’m running around like a headless chicken
Management information
As you grow through this range of annual revenue it becomes harder to mentally manage your business.
Throughout our website, you’ll see we think that good bookkeeping is an essential ingredient of any successful business but you need to build on the bookkeeping with regular, accurate and understandable management information.
Management accounts are likely to include:
- P&L – year-to-date and monthly
- Debtors list
- Creditors list
- Balance sheet
- Cashflow model
- Other relevant reporting from non-finance sources – CRM, sales team, SEO etc.
Your management information needs to be produced quickly and consistently. But most of all, it needs to be acted upon.
=> Management accounts makeover – clarity is everything
What next?
£100k to £500k is a range of revenue where many businesses get to and simply stay there.
Some business owners have the appetite and opportunity to grow. The game moves on.
