Today, I’m going on Blab with Emma D’Arcy and Christina Jones to discuss our worst business nightmares. Yes, it's confession time! I didn’t have to think hard about the #1 business nightmare on my personal hit parade. It was the day I was told that we wouldn’t be able to make payroll.
What's Your Worst Business Nightmare?

This may have happened 13 years ago, but the event is still deeply engrained in my memory! A staggering 50% of profitable businesses run out of cash and go out of business. This is one of the reasons why I’m so insistent that the business owners I coach know their key metrics and get to grips with the financials.

So how did this business nightmare come about?

I was new to my CEO role and still trying to get a grip with the financials. At the time this wasn’t an area that I felt confident about. I was reliant on my team presenting me with the information I needed to understand exactly where the business was at in an easy to understand form. No accountancy gobbledegook basically.

Only they didn’t.

A month into my ‘dream CEO role,’ my Finance Manager came to tell me we wouldn’t be able to make payroll that month. In just 5 days’ time!

Once I’d picked myself up off the floor and poured myself a cup of tea (drinking tea is the customary British way of dealing with nasty shocks) I asked how this could be. It turned out that a number of invoices hadn’t been sent out and not surprisingly, the business coffers were depleted. Invoicing promptly is of course a basic requirement of any competent finance team. The financial systems of our key funders meant that even if we sent out invoices straightaway, they wouldn’t be paid for another 14 days.

Not in time to pay the staff who understandably would be furious.

Because I was new in post, I was able to talk to our key funder and explain the situation without too much embarrassment. Thankfully she was understanding and arranged for an emergency payment to be made and a potential crisis was averted.

Immediately afterwards, I sat down to work out my KPIs: the numbers I needed to keep track of on a weekly basis. (You will have some different KPIs that are relevant to your business in addition to those all businesses should watch like a hawk). These included but were not limited to:

  • Cash in the bank;
  • Money the business is owed;
  • Money the business owes its creditors;
  • Number of sales;
  • Income from sales that week;
  • Conversion rate;
  • Churn rate;
  • The cost of acquiring a customer;
  • Gross profit margin;
  • And revenue percentage.

I then created a simple dashboard so that I could keep tabs on these key business metrics (KPIs) at all times and had my managers update the dashboard regularly. I explain the financial KPIs you should monitor in your business in this article, 6 Financial KPIs To Watch Like A Hawk.

[callout]Are you on the cash flow roller coaster and wanting to get off? If so, my short e-book How To Take Financial Control Of Your Business sets out the first steps to getting off the cash flow roller coaster. You can download your copy HERE.[/callout]

One of the main benefits of tracking your key business metrics (KPIs) is you see changes in your business over time. This means you can spot trends quickly and act accordingly. If it’s a positive trend, then you can take action to capitalise on it. If it’s a downward trend, you can analyse why and take immediate action to reverse it.

This is why I've made a regular habit of setting an hour aside each week for my weekly business review. Basically I have a meeting with myself, and go through my most important business metrics (KPIs). This gives me the space to take a higher level view of my business and ensure that I’m on track to meet my business goals.

Whether you’re a solopreneur or have a sizeable staff team, it’s imperative you know your business metrics. It’ll save you from a business nightmare like mine further down the line!

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Question: What's been your worst business nightmare? I love hearing from you. Please let me know in the comments box below.

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I’m Denyse Whillier, a London based business coach and consultant. I guide entrepreneurs from across the globe to achieve profitable, scaleable growth and create businesses that are Built To Succeed™. Built To Succeed™ is my proven success system, developed during my 8 years in the trenches as a CEO, 25 years’ experience at senior leadership and managerial level and training at Cranfield School of Management, the UK's leading business school. It's this background that sets me apart and helps my clients to get BIG results.

I’d love to start a conversation. Simply use this link to arrange an informal Skype coffee chat. There’s no hard sell. Just solid advice and a straightforward, honest assessment of whether 1:1 business coaching (or business consultancy) would be a good fit for your business, the results you can expect and how to get started.

To get a copy of my e-book, 'How To Take Control Of Your Business ... And Get Off The Financial Roller Coaster,' click HERE.