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Xero’s Make or Break Report: Invest in Your Business or See it Shrink Away

At the end of 2015 Xero released a Make or Break report, after speaking with over 2000 current and former business owners from the UK and USA. All the businesses involved were SMEs with 20 or fewer employees.

The aim of the report was to examine the experience and attitudes of those business who have "made it" and those who have closed their doors for a final time.

To avoid the philosophical debate of what it is to "make it", which is something for us all to define for ourselves. For the purpose of the report and this post, "making it" means survival! With 80% of businesses failing within the first 18 months, making it through those first years is a big success.

Important takeaways from the report…

Successful business owners don't work around the clock.
  • 58% cite spending time with family in the evenings as crucial to their effectiveness as a business owner.
  • 55% say it's important to keep their weekends free for loved ones.
These successful entrepreneurs use automated software to take care of the simple time consuming tasks. As their unsuccessful counterparts are staying up late, updating spreadsheets and sending invoices, they are reading their kids a bedtime story while automation handles the boring stuff.

Successful small-businesses keep their finances in order.
  • 65% of failures blamed financial issues (cash flow visibility, access to capital).
Money is the lifeline of business and cash flow is the single biggest factor and contributor to success or failure of small businesses.

Successful business spend money.
  • 49% spend on marketing campaigns (social media, advertising, PR) compared to 20% of those whose business failed.
  • 31% allocate resources to improving customer service, versus 20% of those in the failed camp.
  • 58% purchase and use software to manage their finances compared to only 14% of failed businesses.
Successful small-business owners keep track of their budgets, but prioritise investment in the future of their business by investing in technology, marketing or strategic initiatives.

Common reasons why businesses avoid investing in their future and automation

"If you want a job doing properly, do it yourself"

Being brought up in a small business household, this is a statement that is burnt into my mind.

This is the credo of many a small business owner and is often the inspiration that drives people to leave their day job and set-up their own enterprise.

In some regards this is a useful mentality to have and can pull you through those tough times, as you bite down on your coffee cup and charge into your fourteenth hour of work that day. Soon though this self-empowering mantra becomes an evil spell you cast upon yourself that traps you into a life of manual data entry, double keying and micro management.

Lack of capital

Richard Kawisaki states in the entrepreneurial bible Rich Dad Poor Dad "the poor work for money and the rich make money work for them".

A common assumption is you need thousands in the bank before you can consider investing in marketing, advisors and software for automation.

When your options for software were limited to expensive bespoke and traditional systems, this was true. Now the playing field has been levelled with inexpensive cloud systems like Xero, which cost just a few pounds a month.

As a result you can now get a fully integrated suite of cloud software to automate all aspects of your small business and free up your work and life time from day one from under £50 per month.

Lack of time

An off shoot of the do-it-yourself attitude above, some business owners assume that it will take them a lot of time to find, set-up and learn to use a new system. Assuming again that they will take on the added work load, to avoid spending extra money.

We all know those owners who take on every job no matter how menial or out of their skill set. Often wearing red sunken eyes, coffee stained ties and half-bragging "I'm so busy", "I don't have enough time", "I have too much to do"… Unfortunately for these people, success is not measured in lost sleep and cortisol.

When it comes to choosing whether to spend money to hire advisers like accountants or technical assistance to set-up software it is worth bearing in mind that time is a non-renewable resource and money is not. Where you can opt to invest money and liberate your time and redistribute it to life and/or revenue generating activities.

Conclusion

Xero's report provides SMEs with some powerful insights and I highly recommend reading the rest of the Make or Break Report.

The main takeaway is that the successful businesses:
  1. Keep a close eye on their current finances and cash flow.
  2. Plan for, and invest in the future.
  3. Use software and other peoples expertise to accelerate growth and liberate time.