Editor's Note: This is the first in a multi-arc series. In the following installments, B2B CFO's Don King will address cash, financial performance, strategy and then pull everything together in a meaningful way. It is not all about spreadsheets, financial statements and bank loans. A company is an organization whose complexity changes as it grows. Some things become easier and others more complex. Recognizing and addressing these changes is the key to long-term success.
To be successful in the business world, a business owner must first not fail. While this sounds easy enough, consider some statistics that are widely shared and rarely addressed regarding privately held business in the United States.
- Over 50% of businesses fail in the first five years
- Over 70% of businesses fail within the first 10 years
This means that 7 out of 10 privately held businesses never generate meaningful wealth or financial security for their owners. When you consider that 6 in 10 privately held businesses are not profitable, it is no wonder that over 80% of privately held businesses that fail consider cash to be a significant strain on the company and a major reason for the failure.
If you are playing baseball with these statistics and failing at the plate 70% of the time, you will likely be in the Hall of Fame at the end of your career with a .300 batting average. However, in the business world, these are sobering statistics.
Much like all good ball players in the big leagues need coaches to help them improve their performance, all privately held businesses need guidance as well. Business owners need knowledgeable professionals to help them address the cash issues, the profit related issues and the other hurdles that impact a company as it matures.
These companies also need trusted and knowledgeable resources to help them beyond the early successes to help the owners decide what to do next.
There are three primary areas of focus that business leadership must master to be successful. These areas are Cash, Financial Performance and Strategy. There are specific tactics in each of these areas that business leaders must understand and master. These areas materially influence the creation of value.
Sounds simple? Recall that over 80% of businesses fail because of the cash flow issues and 60% of privately held businesses do not make money. If the business fails in either of the first two areas (Cash and Performance), there is no need for the third (Strategy).
As the trusted advisor for your business clients, you are expected to lead your clients through the maze of complexities that influence these areas and can make the difference between success and failure for your client.
Don King is a Partner with B2B CFO® Website: My Expertise Hub™. We provide Strategic Business Advisory Services to owners of privately held companies. We focus on increasing cash and company value. By redefining the way that these services are provided, we have created a new industry, which we dominate and lead. With a nationwide presence, B2B CFO® is the largest company of its kind in this industry.
Would you like to learn more on this topic? Register for Don's webinar — "A Strategy for Success for Privately Held Companies," where he'll provide an in-depth look at the things that mean the most and are most impactful to business owners:
- Cash — where does it come from and how is it used? Are we matching short and long term financing with short and long term uses?
Financial performance — a review of the Income Statement and Balance Sheet. How do the financials compare to related companies in the market?
Strategic View — where do we go from here? Where is the company in three, five, 10 years and how do we get there?
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