Uh-Oh!

Ten warning signs your business may be in financial trouble

1 | Net ‘Potential Cash’ (what’s in the bank + what clients owe, less liabilities) falling to the equivalent of less than four months’ running costs.

2 | Total amount owed by clients amounting to more than the total of the last two months’ turnover (+VAT).

3 | More than 20% of business coming from just one client.

4 | Salaries (including regular dividends) totaling more than 60% of gross income (gross income being turnover less direct project costs).

5 | Overheads (excluding salaries) totalling more than 25% of gross income.

6 | Forecast of income from ‘known’ (confirmed) projects falling to less than the equivalent of three months’ running costs for the business.

7 | Total value of ‘prospective’ projects falling below the ‘norm’ for the business (this is usually measured at 5–10 times the monthly running costs, depending on type of business and previous history).

8 | Business owners’ personal financial commitments becoming unsustainable.

9 | Insufficient time being spent on business development (typically in a small–to– medium-sized business, business owners should be spending 25% of their time on developing business, rather than ‘project managing’).

10 | Failure to establish understandable financial reporting systems and frameworks, which can provide information daily, weekly, and monthly, to ensure timely decisions.

By Gary Baxter, DBA Expert, DBA Mentor and director of Lightbox Consulting, which specialises in advising creative businesses (lightboxconsulting.co.uk). Baxter has written a DBA guide on finance for designers, available to DBA members via dba.org.uk

You may also like

3.3_0.jpg - Comic books and the bomb - 4975

Comic books and the bomb

The optimism and anxiety of the atomic age was reflected in the comic books of the time, a new history reveals

orwell1984388_0.jpg - Orwell, covered up - 4995

Orwell, covered up

Brand new covers for five of George Orwell’s works feature in a new series published today by Penguin and designed by David Pearson. The set includes a remarkable take on Orwell’s most well known novel, Nineteen Eighty-Four

includedesign_logo_2_0.jpg - Six minutes for creativity - 4990

Six minutes for creativity

At 11am UK time this morning, the #includedesign campaign to have creative subjects included in the UK Government’s new Ebacc qualification is asking everyone in the creative industry to devote six minutes of their time to raising awareness of the issue. CR is supporting this initiative by writing to Secretary of State Michael Gove

compressorheadband388_0.jpg - Metal. Proper metal - 5005

Metal. Proper metal

Compressorhead, a new hard rock three piece whose covers are garnering praise on YouTube, look set to take Australia by storm in a few weeks’ time. They’re pretty tight, too, but being a band of robot musicians you wouldn’t expect timing to be an issue

parragon_115x115

Packaging Designer

Parragon Books
pilbrowandpartners

Junior Graphic Designer

Pilbrow & Partners
gardenesque_115x115

Designer

Gardenesque
Hand3 copy

Photography Annual

Showcase your photography work to over a million people in more than 80 countries, across every segment of the creative industry.

Enter here