July 2017 - Pain and Pleasure

When we run a business we all have our very favourite activities. These are the things that we prefer to do above all else. But when you flip the coin over we all have things we really dislike doing; things that we try to avoid at all costs.

So that the MD of a local engineering firm may be happiest when he is on the shop floor, creating a brand new design. He planned it in the night when everyone else was asleep, but now, no time for Cornflakes, he's in the CAD room way before anyone else shows up for work. The problem for us all is that when these behavioural habits set in over time, the business can become seriously unbalanced.

Herefordshire once had a hotel that specialised in adventure holidays, particularly for young groups. The husband and wife couple that ran the business were great company; they actually ran many of the group sessions themselves. They had energy, passion and excitement even when taking twenty disadvantaged inner city teenagers for a weekend camping in the Welsh hills.

The problem was the financials; the directors rarely held senior management team meetings and when they did, there were no management accounts and no cash flow forecasts to discuss. In fact they used their Bank Statements to run their business.

One day their overdraft touched six figures. The directors believed that the answer to the situation was to sell more, to work longer hours, to increase occupancy levels by bringing in more groups. But there are only 168 hours per week and when you are already working most of them, the position is unsustainable.

When the bank refused to extend anymore borrowing the business was effectively finished.

Banks believe, rightly or wrongly, that sales are vanity, profit is sanity, but cash is king.