Monday, March 11, 2013

Small Business Entrepreneurs Beware: The Bonds That Tie Down

Financial expert outlines common start-up struggles and steps to avoid the traps
WILMINGTON, N.C. – Initial 2013 indicators show a rising number of people taking the plunge into small business ownership. While some might see this uptick as a positive economic sign, one unsettling trend is still prevalent.
Financial expert Adam Shay warns that one of the largest risks to start-ups in the new year is an age-old issue – one that is both foreseeable and avoidable. According to Shay, entrepreneurs can bypass major risks if they would simply learn from failed business practices of the past.
 “History tells us that businesses struggle from both lack of planning and being more reactionary than proactive,” said Shay, owner of North Carolina-based accounting firm Adam Shay, CPA, PLLC. “Small businesses most often struggle from cash flow issues and a lack of working capital.  This can result from many situations, such as not properly monitoring the business, growing too quickly or taking on debt when they are not in the position to do so.”
As a CPA, Shay plays the role of business coach for many entrepreneurs who face these common obstacles. From his experiences, he has discovered three main factors that most often attribute to “start-up suicide” – an absence of planning or organization, a lack of discipline and the neglect of measurement tools.
“Without strategic planning or organization, owners are not just unaware of what’s causing their success or failure, but in some cases are unsure of whether they’re considered profitable,” Shay said. “Without discipline, owners don't stick to plans, causing them to exceed their budgets and end up in a deep hole. Lastly, without taking advantage of measurement tools they cannot find out what they are doing right or wrong because they haven't identified key factors to their success.”
In order to avoid these damaging factors, Shay has outlined a three-tier approach he suggests entrepreneurs follow when first starting out:
  1. Plan: Develop a strategic plan.  How are you going to get from point A to point B?  The plan will be living documents that grow with you. Develop a financial plan that encompasses anything from budgeting to tax planning.  Plan for your numbers – don't let your numbers control you. 
  2. Manage: Manage your people, processes and systems. Again, manage your numbers. Set up an accounting system to track and measure on an ongoing basis.
  3. Measure: Compare how you are performing against your plan and goals frequently. Develop Key Performance Indicators (KPIs) that give you a quick check on the health of your business and your progress towards goals. 
Although Shay cannot promise these steps will prevent all start-up struggles, he has seen firsthand the positive influence they can have on businesses in all types of industries. From his perspective, so much can be avoided in both the business world and beyond if everyone would take the time to consider the past and improve the present.
“Every time I meet with a new client and hear the same problems, I think, ‘new venture, old tale,’” Shay said. “If only owners would realize that it really can be as easy as one-two-three. It’s all about moving forward once you understand where you currently stand.”

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