Business Success is about Numbers and Time

April 8, 2018
Posted in Blog
April 8, 2018 Mduduzi Luthuli

I’m a firm believer that the cornerstone of a successful business is understanding finances. Or, at the very least, partnering with someone who does. Starting and operating a small business is replete with challenges, but nowhere are the challenges greater than for an entrepreneur to know how to handle their company’s precious financial resources. And this is especially true if the entrepreneur is not a financial person by training. There are several financial lessons business owners (including myself) learn the hard way. In the earliest going you, invariably, can’t afford even the most fundamental outside expertise, but you still must manage what’s coming in and what’s going out of the business (hopefully, more of the former, less of the latter).

For too many entrepreneurs, finances aren’t really their strength. I’m an entrepreneur — a big picture guy – they’ll say. They like to tackle big problems and develop big visions. They don’t like to sit around staring at a financial spreadsheet while they spend hours upon hours entering expenses by hand. Therefore, so many businesses fail so often, so soon. Whether we like them or not, finances are a necessary part of running any business.

Yes, one can argue that there’s no single reason for their failure. But what is painstakingly evident is that a lack of knowledge of basic finance is a common — and dangerous — mistake. Too many business owners don’t understand their own finances and have no idea what products or services make the most profit. Getting a handle on your business’s finances doesn’t mean you have to become an accountant or earn an MBA. The basics aren’t terribly hard, and if you can use a spreadsheet, you’re well on your way. Even if you have an accountant or a bookkeeper working with you, you still need to understand what each item means and where the numbers come from. It is still your business, so why leave the explanation to someone else?

Know Your Numbers

Know which numbers drive your business and stay on top of those metrics. This could include something as basic as your cash balance in the bank or more complicated calculations and forecasts. Create weekly and monthly scorecards to track those metrics.  No matter what stage your company is at, know your numbers and constantly worked to improve on them. If you don’t have enough finance background to determine the right metrics for your business and how to track them, engage someone like a part-time CFO who can help you.

This is even more important if you run a business with inherent cyclic risk. Do you only make money during a certain time of year? As a young start-up you must understand seasonal cash flow. Such businesses are best advised to maintain a three- to four-month cash cushion to help get the company through these slower periods. If you’re a business-to-business company whose sales cycles last months, or even years, having extra capital in the bank can mean the difference between being able to weather the long periods before revenue from past sales manifests and having to fold early because your cash has dried up.

Small businesses may be profitable but not have much cash. They may have made sales on credit, meaning they’re servicing debt, they’re paying for equipment, or maybe they’ve got lease payments. If you know in advance that you may be short of cash, you can prepare. You could look for additional bank financing or try to modify the repayment terms on loans or other debts. But to do any of that, you must be able to predict your cash flow and know your cash cycles. Once you know your numbers, value your time.

Value your time

Your time is the greatest resource and one thing you can’t get back. To execute at the top level, you must understand the full gravity of time. It’s imperative to prioritise your life and business in a way that lines up with what you value most. While it’s important to hustle and grind and look to the future, it’s just as important to allow yourself to live in the moment and take time to give back. That means getting clear on what gives life value and what your time is worth. It took me over a year of running my business to realise I have a right to say no to a meaningless meeting and I MUST monetise each minute of every day.

There’s a famous quote from philosopher William James: “To kill time is not murder, it’s suicide.”

Throughout my experience as an entrepreneur, I have realised that one of our biggest problems is the burden of opportunity: the tendency to take advantage of every good thing. I only have so much time during the day, and once I use it, it’s gone. I can attribute my successes and my failures during my career to the moments when I decided to use my time for one thing over another. Every decision in our lives, every action, and every impulsive reaction is the result of a brief weighing of our priorities, whether conscious or subconscious.

You’ll only be truly successful when you honestly assess the value of your time and weigh it against the demands on that time. Let’s make this easy: If you value an hour of your life at R100, every request for help and every phone-call must be measured against that value. Your time is the only asset that can’t be borrowed or bought. You can’t store it away for a rainy day or put it in savings. Either you spend time, lose time, or someone steals it. 

Has someone “wasted” your time, or pulled you into a meeting you didn’t schedule? If anybody treated your money the same way, it would be theft and they would be fired or jailed. Why is your time any different?