I had a great conversation at a recent networking breakfast recently. It was with a group of SME financing people with specialities from Tax Debt to Exporting – and some great stories were told. A lot of them had the same list of “if only they had knowns”.
The question which sparked the conversation and led to this list was:
What are some key things that most SME operators “don’t know that they don’t know” when they go into business?
Most SME operators are great at delivering products or services – but not all of them understand the financing issues that can limit their business.
After that great breakfast conversation – and some further reflection – there are six key “unknown unknowns” that I see all too often are:
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The future-threatening risks of harmless-sounding “All monies” clauses on big bank “business” loans.
This clause means that if the bank that loans to your business also finances your home loan, then it can call on ALL your assets – including your home.
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The importance of choosing an accountant (or other financial advisor) who does strategy, not just tax returns. (And monitoring the quality of that advice over time?)
“It takes a village to grow a SME” – every so-called small business “hero” has a team of advisors – including someone who can advise on strategic money matters.
The myth of the successful solopreneur is just that – a myth….
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The importance of diversification – not just your customers but suppliers – and ALL your suppliers, including your finance providers.
“If you only have one customer, you’re a subcontractor, not a business.”
Likewise, if you only have one business-critical supplier – whether it’s for a key input or for working capital – then you’re living on the edge whether you know it or not.
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The stressful realities of the SME Cash Gap that’s embedded in many of today’s industries.
30-, 60-, and 90-day credit terms are increasingly common in all sectors. What’s NOT recognised is that they create chronic cash flow havoc – because the costs of operating bills keep coming, even though you may have to wait months to get paid by your customers. (Find out more about the Cash Trap here.)
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The surprising – but horribly true – reasons that making more sales can make your cash flow much HARDER to manage, not easier.
Structural cash gaps mean that big new orders create even bigger bills for goods and services – bills you have to pay LONG BEFORE you get paid. So that big, new order that could take your business to the next level could ALSO end up strangling it.
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The powerful success tools – still often unknown – that today’s tech-enabled SME finance products (particularly Debtor Finance) deliver to smart small businesses.
The power and flexibility that 21st century tools offer SMEs, allowing you to borrow against your business balance sheet instead of risking your personal assets – and which come without the slow, excessive, onerous approvals that the big banks require.
We operate in exciting times
Today is NOT like yesterday (almost literally) and tomorrow will be different again. Success in today’s constantly changing world starts with understanding today’s realities – not banking on yesterday’s assumptions.
If you suspect that your business could be operating on 20th century Cash Flow assumptions, then book a Working Capital Strategy Review to find out TODAY – before it costs you big money.
