Failing to Plan, Planning to Fail

How Avoiding Your Business Finances Is Derailing Your Success

 By Staff Writer

Congrats! You’ve built or are on your way to building your business venture. You are first and foremost an entrepreneur, an innovator, a game-changer. With this comes the exciting and challenging task of running your own venture and your company finances.

While it’s common advice to hire a finance expert in your team, all too well, the liabilities, assets and the final say ultimately rests with you. Because of this immense and exciting responsibility, we spoke to Jason Locke, Managing Partner of Wolf & Company, who offers helpful tips to help you with the transition to becoming more financially confident in your venture.  

Take A Hard Look

As an entrepreneur, you should ensure that you have an appropriate budget & forecast in place that’s rooted in the realities of your business. Locke has observed that many entrepreneurs are generally too optimistic and avoid looking at the worst-case scenario. “I think a lot of times, people don’t like looking at the forecast and looking at the worst-case scenario. They don’t want to face it, and feel like it might kill their vision,” says Locke. “No one wants a forecast of their business failing, but what are you going to do when it doesn’t work as you expect?”

By preparing and having an idea of your bottom line, you are able to see a clearer vision of your company, and where the pitfalls may arise. More realistic forecasts and projections also allows you to leverage any further financing you may need down the road. Locke says that a lender doesn’t typically like to see projections that are optimistic and it not panning out. With more realistic projections, you are better able to explain any pitfalls if you seek additional rounds of financing.  

How Are You Managing Your Working Capital?

Depending on the nature of your business, you may need lots of working capital to purchase inventory or equipment.  As you begin to spend your hard-earned cash, ask yourself if what you’re purchasing or holding is actually necessary for you to deliver overall value to your customers.  

Locke says to a deep dive analysis of the equipment you are looking to purchase and determine if it’s really the best use of your money. He sees many clients purchasing expensive pieces of equipment, with very little output or a return. This could have been capital to invest into other parts of your business, which could provide a greater rate of return.

Real Estate Remains King

A goal that Locke always advises his clients is to try to eventually work up to buy the real estate where their business is operating from. Whether you’re a corner store, or in a traditional office setting, owning your actual space can reap dividends for you down the road and ultimately help your business.

Locke has seen many instances when businesses have experienced several years of downturns, yet were able to secure capital and continue to operate because of their real estate asset. “The best asset you can have long-term for your leveraging your business is real estate, and it could be that financing you need for growth. Banks necessarily don’t want to finance startup ventures or growth, but their sentiment changes when they see you a piece of real estate,” says Locke.

As the adage goes, failing to plan, is planning to fail, All of these tips require thoughtful planning and being critical of your company finances as you begin to grow and scale.  

For more information on Wolf & Company, visit their website wolfandcompany.ca or call them at 604-581-6211.