With the latest series of ‘The Apprentice‘ hitting our screens tomorrow, Alastair Campbell, founder of business data site Company Check, explores what Lord Sugar’s advice means for your business.
Knowing your numbers; it’s one of the basics of running a business. But how well do you understand the financial standings of those you work with and for?
As business people, one of the very first things we learn is the importance of knowing your numbers. Lose focus on how the business is doing financially – where the money is coming from, where it’s going to, and how you’re going to get more – and you risk failure.
Neglect to understand this and we risk letting other entities cause our failure – but this can be prevented.
In his guest post for Company Check, renowned businessman and star of The Apprentice, Lord Sugar, shared his belief that knowing the numbers of your suppliers and clients is as important as knowing your own. He said, “There’s no business out there that doesn’t rely in some part on another, for the provision of services, products or promotion. Your business will have suppliers and it will have customers and it’s important to know their numbers as well as your own.”
“Why? It comes down to trust and, to be frank, just being sensible. Due diligence sounds like a big undertaking but even just having a basic understanding of a company’s credit rating and financial status can alert you to potential issues and arm you with the knowledge you need to form a more secure relationship, based on trust and transparency.”
Achieving a level of transparency with those with whom you have business dealings can put you in a much more powerful, and safe, position. So how can you achieve this in your business?
Do your due diligence
Due diligence is an essential part of any new business relationship. In order to understand how well positioned the company you seek to work with is to fulfil their end of the deal, you need to know they are financially sound.
Checking their credit rating and other key financial information through sites like Company Check can arm you with the information you need to make more informed decisions.
That’s not to say you would necessarily choose not to work with a business based solely on their credit data, but that you are empowered by it to have important conversations that negate the risk of issues further down the line.
Be transparent in your processes
Many of the business relationships we have rely at least in part on processes. The most important one financially is likely to be your payment process – the set of rules and dates you have in place to ensure you get paid and make the payments you owe.
By being transparent about how these processes work, you can open a discussion with the other party about how your processes fit with theirs, and the implications for their numbers as well as yours.
Of course, there may also be other processes which relate to your relationship with the other party too, such as communication regularity or reporting too, which should also be agreed upon and clear to everyone.
Have regular reviews
It’s one thing to ‘know their numbers’ before your relationship with a new customer or supplier begins. You should also keep an eye on how things are progressing throughout the relationship so you can pre empt any potential issues there too.
There’s another reason to keep abreast of their numbers too. As Lord Sugar puts it;
“There are very few businesses that have grown without any input from anywhere else. From simple peer-to-peer advice, to the provision of services or products, right through to investors or shareholders, every business owner will be indebted or at least grateful to someone along the way.”
“It’s fair to say that when their business grows, yours should too. If you see a supplier of yours is experiencing huge financial growth but that that hasn’t translated into a better service for you in some way, that’s the time to start asking questions.”
It’s not easy to ask financial questions in business, especially when you’re on the brink of closing a deal or signing a contract, but understanding how well positioned those we work with are to meet their obligations to us can make the difference between success and failure. Take the time to get to know their numbers as well as your own now, and run a more sensible business now and into the future.