Founding, managing and growing a business is a BIG commitment. For most business owners, it will take years to build a customer following, turn a profit and create a truly scalable business. It's a journey that can sometimes be pressurised, stressful and risky. But when your plan really does come together, there is the chance of real success, a lasting legacy and a business that delivers on your initial dream. So, how do you know when you've truly achieved your goals for the business? Has the business met its growth targets and scaled up as intended? You’ll have seen your business idea grow from being a fledgling startup, to an established business and on to become a scaled-up, ambitious enterprise with a solid customer base. If you’ve met these growth targets, then you know you’re on pretty solid ground as a business. Your idea clearly has legs and you’re delivering a product and/or service that your customers see as valuable – and which they’re willing to part with their hard-earned cash to purchase. Are you running a profitable enterprise that's in good financial shape? Running a tight financial ship is crucial. You need solid revenues, positive cashflow and good liquidity to keep your business ticking over. In the early days of being a startup, cash will have been tight. And your own personal income as a founder and director will probably have been scarce too. But as the business has become more established, you should have found that your business revenue became more stable and predictable – and that your own personal wealth also followed this same reliable pattern. If the business has a solid balance sheet, great cash flow and meets your intended profit targets, you’re onto a good thing – and can be sure that your financial position is in good shape. Do you have a stable customer base who say good things about you? Without customers, you don’t have a viable business. Finding your first customers as a startup was probably a significant turning point in your journey. A good customer base brings with it the bonus of new sales, fresh revenues and a business that can actually turn a profit. When customers engage with you and buy your goods and services, that comfirms your original faith in your business idea. You’re providing something they value and want to purchase, and you’re also building a community of like-minded people who all think your brand is great. Do you have a team who can operate the business without you? In the early days, you’ll probably have become a jack (or jill) or all trades. You’ll have run the sales and marketing campaigns, taken care of all the main operational tasks and dealt with the many invoicing, accounting and bookkeeping tasks. Turn the clock forward, and you probably have a team of people around you to take care of these jobs – but could they function with you? This is really the acid test of whether you’ve scaled and succeeded. If the business is still reliant on you, personally, you have a problem. To be a saleable proposition, a business needs to function effectively without the founder. If not, you’ll never be in a position to sell up. To make this possible, you need a team of engaged and talented people around you – people who share your vision and talents and who can keep the ship on an even course, even once the original captain has set sail on fresh, new adventures. Do you feel you've achieved what you wanted to achieve? In your formative years as a founder, you’ll have sat down to draw up a startup plan. In that plan you’ll have outlined a clear vision for what this business was going to achieve. This vision might have been: To scale up over five years, sell-up and retire To deliver a new kind of technical widget and make it the global standard To help your target audience improve their lives, helped by your product/service To provide the income needed for you to live your desired lifestyle To plough your profits back into the local community and be a force for good. We all have different goals, and whether they are financial, personal or moral comes down to the individual. The important thing at this point is to assess whether you’ve actually met the vision that you set out to achieve. If your aim was to sell for a profit and then retire, are you ready to do this? If the goal was to become a household name and move your sector forward, do your customer engagement figures and market share stats reflect this? Deep down, only you and your fellow founders know whether you’ve truly met your intended goal. But if the general consensus is that you aced it, then it’s time to think about the future. What’s the next chapter in your business story? If you can answer yes to all five of these questions, then congratulations! You've built a successful, stable and profitable business. But what do you do now? Do you continue to plough this fertile furrow and live off the profits? Do you find a buyer for the existing business and start on your next business idea? Or do you sell up and look at retirement and enjoying the benefits of your money and lifestyle? It's a good idea to talk to us before you make what is, essentially, a life-changing decision. If you’d like to talk through your options, book a call with us or call us on 01904 787 973.

Your profit and loss statement (P&L) helps you understand your business performance and profitability over time. It’s sometimes called an Income statement and its main purpose is to list income and expenditure. Whereas a balance sheet is a snapshot in time, the P&L shows transactions over a specific period of time. This can be a month, quarter, financial year or any other period, and it can be a stand-alone report or a comparative period report. Together with the balance sheet, these two reports provide a comprehensive understanding of the financial position and performance of a business. The profit and loss statement has two main sections: income and expenses These may be further subdivided depending on the complexity of the business and reporting requirements. Income or Revenue Income primarily includes main business activities such as sale of goods or services. Other income such as interest received, capital gains or income from secondary business activities is also reported. Expenses Expenses are usually divided into two sections: direct costs, or cost of goods sold, and expenses. Cost of goods are those that are directly linked to the provision of services or sale of goods. For example, if you buy widgets from a wholesaler and sell them at a marked-up value, the cost of the widgets is a direct cost, not an overhead expense. Other types of direct costs might be importing and freight costs, contractor costs or certain equipment. Some direct costs are fixed, that is, they are the same from month to month, or they could be a fixed percentage of sales; others vary in value but are still related to the income producing activities. Overhead expenses are all the other expenses required to run the business, regardless of the level of income: for example, rent, utilities, bank fees, bookkeeping fees, professional development costs, vehicle costs and staff costs. Many of these costs form the basis of working out your break-even point, or how much it costs just to open the doors for business. There are some expenses which may be reported as a direct cost in one business but an indirect cost in another type of business, for example, merchant fees or contractor costs. The bottom line Total income minus total expenses results in the net profit (or loss), is often called ‘the bottom line’. Often business owners are just interested in looking at the bottom line, but a true financial picture requires an understanding of several reports and an ability to see the big picture that the reports are illustrating. The P&L is a vital tool to analyse for trends over time What does your P&L tell you about relationships and ratios between sales and expenses, seasonal changes and annual trends? Have all your direct costs been allocated correctly? Have you recouped all billable expenses from customers? Financial statements help you understand the big picture for your business. With deeper understanding of your business operations and performance you can make informed decisions about your business finances. Book a call with our team to examine your financial reports with our experienced business advisors.