Is there a pilot in the plane?

Have you ever been inside the cockpit of an aeroplane? Hundreds of warning lights let the pilot know that everything is under control or, on the contrary, that urgent action needs to be taken. This is what makes today's aircraft a safe means of transport. Running a business is much the same: you need to know what to do when you're sitting in the pilot's seat and to have a craft that's ready for take-off (and, of course, one that has as little negative impact on the environment as possible), a destination (objectives) and reliable indicators to check that everything is going to plan. Although turbulence can't be completely avoided, it can be managed more effectively with the right approach.

This may seem obvious, but every day we (=1819) come across entrepreneurs who are facing more or less serious difficulties because they fail to follow these basic principles. For these entrepreneurs, a brochure has just been published listing various places where they can seek assistance in the event of a problem. Ideally, you should seek support as soon as difficulties arise, rather than waiting for the situation to deteriorate to the point of no return. To find out whether a company's health is failing, it's essential to monitor a few indicators, as we'll explain here.

In the pilot's seat

To open a business in Brussels, you no longer need to prove your basic management skills. That's not to say there's no point in having any - quite the contrary! You should be able to understand and track a few indicators, which we will discuss below. Additionally, you might need to develop other skills that are specific to your business. Fortunately, there are many training resources available, so make the most of them!

A craft that's ready for take-off

Would you board a plane missing a wing? No? Why would you do it with a business? Taking the time to prepare your project thoroughly will enable you to evaluate your short-, medium- and long-term financial requirements. After all, you wouldn't try to cross the Atlantic with only five litres of kerosene, right? Furthermore, designing your project with resource efficiency in mind is not only beneficial for the environment, but also for its feasibility. You can find valuable advice on sustainability by checking out our sustainability pages.

The destination

You can't take off without knowing where you're going – you need a flight plan. However, many entrepreneurs fail to set long-term goals and instead operate on a day-to-day basis. They grab opportunities as they arise without considering the bigger picture. Of course, it's a good thing to seize opportunities and not stick to a rigid plan. But this way of working means never being able to take a step back, always being involved in day-to-day management and emergencies. Without clear objectives, you're also likely to set the wrong priorities, giving more weight to what's urgent than to what's important, potentially blocking your company's growth. This can result in fluctuations of activity, with slowdowns that require entrepreneurs to spend time looking for new customers. In short, set yourself medium- and long-term objectives, draw up a corresponding provisional budget and make sure that every project you undertake takes you  in the right direction.

Indicators to follow

It's up to you to equip your cockpit with the indicators you need, which will not be the same for all types of activity. Below are just a few examples. Don't hesitate to discuss them with your accountant. And if the following seems incomprehensible, sign up for some training (in particular, the workshops organised by 1819, EFP and CED)!

In order to track indicators effectively, it is important that the values being measured are easy to quantify. It is highly recommended to take advantage of IT tools that can make tracking your results easier. Depending on the size and complexity of your business, the tools you use can range from something as simple as an Excel spreadsheet to accounting software, CRM, ERP, or other similar tools. Some of these tools may require a small investment. However, if used properly, they will pay for themselves by saving time and enabling well-informed decision-making.

Standard indicators:

Cash flow:

Entrepreneurs can sometimes overlook the importance of monitoring how much cash they have on hand, as they tend to focus more on the invoices they issue (sales). However, it's crucial to keep track of your available cash each month to ensure you have enough to pay your bills. Sometimes, customers can take a long time to pay their invoices, which can create a lag that may get you into serious trouble if you're unable to pay your bills. This is particularly common in fast-growing companies, where business growth can outpace financial growth. To avoid such problems, we recommend that you:

• keep a cash flow statement (showing monthly income and expenses, and available cash). This will enable you to plan for times when you may find yourself short of cash;
• carefully and systematically monitor client payments. The longer you wait to claim an overdue payment, the more likely you are to never receive this money. Not to mention the time and money spent on potential reminders and lawsuits.

Turnover:

This is often the figure most familiar to business leaders, and it's important to monitor it on a regular basis.

• You can track your turnover month by month using a simple graph. Is turnover in line with your forecasts?
• You should also track incoming payments in the same way, i.e. when invoices (=turnover) are actually paid (or never paid). Once again, you should monitor clients carefully, but you'll never be able to eliminate all unpaid bills. What percentage of your sales does this represent?

Profitability

This may seem obvious, but many entrepreneurs don't realise that they've made a loss until they've drawn up their balance sheet for the year. They focus on changes in turnover while neglecting some costs, such as indirect costs, or not taken into account the overall costs involved in running their business.

• Calculating your company's profitability is simple: sales - fixed costs - variable costs.
• This calculation can also be made by product/service, or by client.
• Other indicators:
  • It's possible to set up specific indicators for your business - talk to your chartered accountant! A few examples:
    • Operating margin (operating income/net sales)
    • Sales performance (number of invoices issued/number of quotes issued)
    • …

Mayday ! Mayday !

Tracking indicators will enable you to react quickly in the event of an alert, analyse the situation with your chartered accountant, or seek help from an organisation offering support.

What are the warning signs?

• Orders or turnover down by more than 15%;
• Income statement showing a loss;
• Late payments or debts owed to tax authorities, VAT, NISSE or NSSO (from one unpaid quarter);
• Late payments for rent;
• Increased debt, loss of financial independence;
• Increase in client payment times (trouble following up on receivables);
• Suppliers refusing to extend payment deadlines;
• Several monthly credit payments in arrears;
• Cancellation or non-renewal of credit that had previously been granted;
• Voluntary departure of the best employees/subcontractors;
• Problems with customers or suppliers representing more than 25% of sales or purchases.

Internal or external events can also affect your business. The following should require your immediate attention:

• Departure/death of a key person in the company;
• Labour disputes, arguments, major disagreements between partners;
• Collapse of the market, or of the sector;
• New legislation;
• Logistical issues, difficulties and delays in supply.

The sooner you take the bull by the horns, the better your chances of saving your business. Sticking your head in the sand and ignoring registered letters never saved a business.

Please refer to our brochure to find out where to find help in the event of difficulties.