According to a study from Harvard Business School, approximately 75% of venture-backed business startups fail. Another study, this one from Statistic Brain, finds that the failure rate for all U.S. businesses is 70% just 10 years from launch. Yet another analysis, this one from Neil Patel and published in Forbes, puts the number even higher, with some 90% of all startups failing.
Why Do So Many Startups Fail?
Although analysts don’t agree on the precise number of new businesses which aren’t able to make it, they agree about the reasons why. They range from a lack of product/market fit to poor organization, a lack of motivation, and poor cash flow. Among the more prominent causes of business failure is a lack of focus or core business operations like marketing and product development. Exacerbating this lack of focus is the attempt too many businesses make to do everything themselves, including those things in which they have little or no experience.
Some Mistakes are Game Changers
A new business can survive a host of small short-term mistakes, like not effectively leveraging social media or providing less than stellar customer service. These are mistakes that can be fixed over time. Other mistakes, however, are irrevocable and deadly. For example, if you offer products people don’t want or can get for less elsewhere, you’re not going to succeed. Similarly, if your business runs out of money, or isn’t appropriately insured, it’s going to fail. Fortunately, there’s a way to avoid these and similar financial mistakes: partnering with an experienced virtual chief financial officer (CFO).
Here are 5 reasons your business should consider partnering with a virtual CFO:
1. You’ll Increase Profits
Although it might seem counterintuitive, hiring a virtual CFO can add to your bottom line. For one thing, a virtual CFO will cost less than you would pay for a full-time employee. For another, your virtual CFO can provide you with more accurate financial information to make better decisions about your business. Finally, a virtual CFO will conduct sophisticated profitability and financial trend analyses. These help you gain a competitive advantage and increase your market share.
2. You’ll Reduce Risk
Your business faces multiple risks, from a lack of internal financial safeguards to ineffective A/R procedures, inadequate business insurance and weak cyber-security. A competent virtual CFO will be better equipped to assess these risks—and to reduce them—ensuring your business can succeed.
3. You’ll Be Able to Focus on Core Business Operations
When you’re forced to trod through complex financial issues which you neither fully understand nor have the time to navigate, you’re less able to focus on those activities which are critical to your business’s success. When you work with a virtual CFO, you can spend more time on things like marketing and customer retention. You’ll have more time to conduct the research and development necessary to give those customers products they want and need. Working with a virtual CFO partner, you can rest assured that your financial operations are in good hands, giving you the confidence and time to take care of those things most critical to your company’s success.
4. You’ll Enhance Your Cash Flow
The best CFOs know how to manage and analyze cash flow to ensure efficiency and liquidity. They’re also able to navigate ever-changing business tax laws to make sure you don’t spend more in taxes than you’re required to. Working with a virtual CFO, you’ll retain more of your profits and have the cash you need, when you need it, to keep your business thriving.
5. You’ll Improve Your Business Strategy
Today’s virtual CFOs know more than finances and accounting. They also understand business and can be trusted partners in the development of a comprehensive strategic plan. The best virtual CFOs have held senior financial positions in the business world. They even offer guidance about corporate governance, organizational structure, and effective operational processes. When you hire a virtual CFO, you get much more than a financial analyst. You also get a strategic partner who will help you make sound business decisions to ensure your success.
You’ve put everything you value into your business. It simply doesn’t make sense to risk all that time and money because of an inadvertent poor financial decision. An experienced virtual CFO can help you safeguard your investment by providing sound financial and business advice.
To learn more about the ways our financial modeling, CFO, bookkeeping, capital raising and financial reporting services will help you increase profitability and grow your business, contact us today.
Also published on Medium.