by Industrius CFO | Financial Analysis
You are passionate about your business. You worked hard to get to where you are, and you have full faith that your company can thrive, providing the highest quality product and the most excellent customer service on the market. But maybe math, finance, and accounting are not your strong suits. As knowledgeable as you are in your particular field, and as much as you believe in your brand, without the proper financial management, your business is not likely to succeed. A whole 25% of all businesses fail after their first year; 36% fail after their second year, and 44% after their third year. By the end of their fourth year, half of all businesses have failed. If these statistics scare you, you need to take action to prevent your business from going under. Nearly half of all businesses fail as a result of financial incompetence. These companies have no understanding of pricing for the market, possess no knowledge of financing, and lack the proper planning to maintain a healthy budget. Do you know how to compute profit margin ratio? How about identifying financial risk analysis? Are you confident in your interpretation of financial statements? If the answer to any or all of these questions is “no” you would be wise to invest in the proper budgeting and planning software. Do not waste your time agonizing over complicated statistics and puzzling financial ratios. To you, all these numbers may look like the matrix or a secret code of communication for extraterrestrials, but a financial performance analysis tool like a budgeting and planning software program will put it all into terms...
by Industrius CFO | Financial Analysis
All businesses are unique — small businesses especially. While some sort of uniform algorithm would certainly be helpful to determining the keys to running a successful small business, the best many small business owners can hope for is to learn from their peers and by studying what other businesses are doing right. By examining these common threads between successful small businesses, small business owners can cull the secrets of success and apply them to their own business models, learning what they should and should not do. So what makes a small business a success? Here are three keys to success that many thriving small businesses share: Knowing Your Product Did you know that 11% of business fail due to a lack of understanding of the goods or services they offer? As a business owner or employee, this is simply unacceptable. Not only does this make you a weak asset on the floor with customers, but it can lead to a waste of money and incorrect pricing. Instead, successful small businesses educate themselves in all facets of a product or service, such as financial ratios by industry logistics or financial statement trend analyses. With the right tools and planning software — such as business valuation software and budgeting and planning software — in place, it is easier to be successful. Having Strong Leadership Statistics show that 30% of businesses fail due to a lack of managerial experience. When a manager is unable to lead their employees, it becomes a negative chain of command and will trickle into the rest of the business. Successful companies have experienced leaders that are willing...
by Industrius CFO | Financial Analysis
Between 2013 and 2014, over 5% of 14,405,210 businesses surveyed closed their doors due to inefficient cash flow. A lot of things can go wrong for an entrepreneur, but if you plan ahead and determine a specific goal, understand your market, choose your location wisely, and conduct a proper financial risk analysis, your chances of success will remain strong and steady. 4 Secrets of Success for Small Businesses Set a clear goal First, your goal should always be written down or documented somewhere. Your business’s goals should have a set timeline. There should be a system in place for measuring success and documenting progress. Your goals should be prioritized wisely. Know the market You must have a target market in mind. To determine who will use your product, where this demographic is located, find a location in which there is a lack of your product or service, and identify your competitors, you will need to conduct extensive market research. Many entrepreneurs make assumptions about their target market, but relying on instinct alone is one of the fastest ways to failure. Find the best location Everyone has heard that a business’s success is all about location. This is partially true. When deciding where to set up your business, do not settle on the first space available. Take into consideration all of the risks associated with a particular area. Consider the climate, neighborhood, type of building, and the kinds of natural disaster risks present. There may not be many facilities available immediately, but do not rush the process and settle for something less than adequate. This could cause you...
by Industrius CFO | Financial Analysis
In previous blog posts, we’ve told you that one in four businesses fail during their first year. That number increases to 36% by the second year, 44% by the third year, and 50% by the fourth year. Since small businesses are the lifeblood of any economy, that’s a disturbing set of data. Even worse? It’s estimated that up to 46% of businesses fail because of “incompetence.” In other words, they’re either ignorant of financing and pricing, fail to pay the taxman, or spend too much too soon. How can you avoid their fate? There’s no magic bullet to keeping your company in the black year after year, but there are some crucial steps you can take to keep your company healthy as it grows. Now, it’s important to remember that many of the most successful businessmen in U.S. history were self-taught. While an MBA from an elite university won’t hurt, all the tools you need are right at your fingertips. With a solid business plan, the right tools, and the right people to use them, your company can rise above mediocrity and stay in business. In 2016, business owners do have one major advantage over entrepreneurs of the past. In these digital times, it’s never been easier to find financial planning software. While you can find software that runs financial risk analysis or helps you calculate your current assets, today we’re going to focus on one particular type of software for business managers: financial statement analysis software. Used correctly, financial analysis software can be a powerful forecasting tool. But like any tool, it can be used incorrectly. How To...
by Industrius CFO | Financial Analysis
Every business — no matter what the industry or field — eventually comes down to bottom-lines and profit margins. No matter how great a product or cause you might create and represent, it does no good if you can’t keep your doors open. That’s where financial data analysis tips for beginners and experienced business people comes into play. Financial data analysis is literally the process of reviewing and analyzing a company’s financial statements in an effort to make the business more economically efficient and ultimately more profitable. However, understanding financial ratios and determining business valuation can be complicated and difficult processes. Luckily, help is out there. Here are just a few of the reasons why an investment in financial data analysis is a good business decision. You Don’t Know What You Don’t Know: It might be a bit cliche, but it’s the truth. Even the best, most intelligent people in business aren’t necessarily experts at financial data analysis. In fact, most people become leaders in their industry because they’re experts at whatever it is they create, produce, sell, or service. Not because they can read numbers and predict outcomes. Overall, “incompetence” is the reason why almost half (46%) of businesses fail. Not because they don’t understand their industry, but rather intricacies like pricing, record-keeping, tax mistakes etc. Small Inefficiencies Add Up Fast: Take care of the little things or they’ll wind up becoming big problems. Just like putting off maintenance on a furnace or vehicle will typically result in more serious damage in the long run, the same can be said for financial data analysis. Your business might be...
by Industrius CFO | Financial Analysis
Technology is advancing at a rapid pace over a multitude of industries, and the corporate world is scrambling to catch up. It seems as if the bottom falls out for a major corporation every single day, and you need the best tools possible to ensure that your company isn’t next on that list. With financial analytics software, you can be privy to a wide array of essential information that could make or break your business. Better yet, it may reveal some hidden truths about both your business and competitors that could alter your entire business plan. From budgeting to financial ratios, you need a comprehensive financial risk analysis solution for every component of your business. Investing in these tools is absolutely crucial if you plan on keeping up with the competition. Here are just three of the many ways that financial analytics software can help your business reach new heights: Budgeting and planning software Between 2013 and 2014, about 0.7% of 14,405,210 surveyed businesses ceased operating because of a lack of personal loans/credit. This is unacceptable, and most of these failures could have been avoided with professional budgeting solutions. Financial analytics software will take all of your loans, credit, and other liabilities into account to ensure that you have enough capital to keep growing. Business valuation “Incompetence” is the reason why nearly half (46%) of businesses inevitably fail. These companies tend to price emotionally, live too high for the business, don’t pay taxes, have no knowledge of pricing, lack proper planning, possess no knowledge of financing, and have no experience in record-keeping. Business valuation should play a major role...
by Industrius CFO | Financial Analysis
Starting a new business can be difficult. Nearly one quarter of all businesses fail about one year after they open. Nearly 50% of all new businesses go under within four years. Many do not succeed, because they cannot get access to enough start up capital. Others go under because of sheer incompetence, which accounts for nearly half (46%) of all business failures. The problems caused by incompetence include improper pricing, a failure to pay taxes, bad business planning and improper, or lack of record keeping. Poor management kills another 30% of new businesses. These companies expand before they are ready to, do not borrow the right amount of money, or do not understand the best way to grant credit to customers. If you are going into a new business, having a thorough financial risk analysis done can start you off on a better foot, and help your business succeed where others have not. Make Better Business Decisions with These Tips: Think about Patton General George S. Patton once said, “A good plan violently executed now is better than a perfect plan executed next week.” That can be translated into business success by forgetting about perfection. If you are constantly thinking that you have to be perfect, you are never going to get anywhere in business. You can overthink things and get stuck, so that nothing gets done. Getting 80% of something done and delivered early is better than 100% done and delivered late. Get outside of your head sometimes It is possible to over think something or to just spend too much time in your own head. Take...
by Industrius CFO | Financial Analysis
When it comes to running a business, the difference between success and failure can depend on a multitude of things. However, some key aspects of maintaining a well-run organization are often overlooked by novice business owners, which can lead to failure. One of the most important factors of successful business ownership is taking the time to calculate total current assets and make business decisions based on this vital information. One-quarter of businesses fail within their first year, while half of businesses fail by their fourth year of operation. Although these statistics may be as staggering as they are intimidating, it’s important to look at the reasons behind these failures. Nearly half of failed businesses go under due to incompetence, meaning they price emotionally, live beyond their means, don’t pay taxes, don’t understand pricing or financing, and aren’t able to correctly keep records. By failing to calculate total current assets of an organization, managers and business owners are depriving themselves of key information that should drive a multitude of their decisions. If your enterprise is lacking correct financial risk analysis information, completing a balance sheet can be a great idea. A balance sheet is a statements that calculates financial aspects of an organization, including the assets, liabilities and equity. This document is used to calculate the net worth of an enterprise. Base Equation: When attempting to create or understand a balance sheet, it’s imperative that you understand the “equation” that is used. Essentially, the owner’s equity added to the liabilities of the business equals the total assets. If you’re looking to calculate the owner’s equity, you subtract liabilities from total...
by Industrius CFO | Financial Analysis
Unfortunately, there is no step-by-step manual for running a successful, profitable small business. With so many outlying factors and variables that are beyond your control, it’s important to pay attention to the factors that are within your control, such as financial analysis. Reasons for Failure Before assessing what you can do to succeed, it’s important to learn from the mistakes of others. For instance, one-quarter of businesses fail within their first year. Of these businesses, “incompetence” is a leading cause of failure. This means they price emotionally, live beyond their means, don’t pay taxes, and/or lack fundamental knowledge of business operations and financing. A lack of managerial experience is the culprit behind the failure of 30% of business venture failures. Poor financial practices, on both ends of the spectrum (spending and profits), will put the nail in your business’s coffin. How to Succeed While there are countless valuable tips, tricks, and processes that will drive your business towards success, one is often overlooked. The financial analysis side of business can be tricky and misleading, which is why it’s important to calculate total current assets, identify aspects that need improving, and identify potential and current risks. Financial statement analysis software aids managers and business owners in creating an analysis of financial performance and a comparison against industry standards. The benchmarking ability of this software creates an in-depth report for users. With an ability to incorporate templates that measure current ratio, operation and production costs, revenue per customer, and budgeting reports, it provides a totally encapsulating analysis of your organization’s well-being. With the help of financial statement analysis software, many business...
by Industrius CFO | Financial Analysis
Running a business, big or small, comes with a set of difficult obstacles that must be successfully tackled before becoming truly successful. This is evident in the statistics surrounding small business failure: One out of four businesses fail within their first year of operation. Half of businesses fail after their fourth year of operation. Inadequate cash flow or sales were cited as the cause of 5.2% of business failures between 2013 and 2014. While these statistics may seem terrifying to some, there are a large number of business owners who decide to take a stab at entrepreneurship without properly educating themselves beforehand while continually educating themselves throughout the duration of ownership. One of the processes that is most important on the logistical side of running and operating a business is benchmark analysis. Benchmark analysis is the comparison of the processes and metrics of a business to industry standards and bests. Quality, time and cost are typically the most commonly measured dimensions in benchmark analysis. As a key aspect of running an business with optimal success, benchmark analysis intends to identify areas of operation that need improvement, what those improvements need to be and how to make them. This is done with the help of financial data analysis software, key ratio analysis of financial statements, and industry average financial ratios. Keep in mind that it’s unfair to compare each aspect of your business to another without taking variables and differences into account. Each business is individual and should be treated as such. However, comparing your business model to an industry-leading business model can unveil some problematic practices that were overlooked...
