H&A, Hampshire
“Starting a business was the logical next step in our careers. Having worked together in a similar type of company, my partner and I had accumulated a lot of experience in marketing, service delivery and administration. We did heaps of research on ‘starting a business’ and pulled together templates for financial forecasts (or so we thought). With a detailed plan and hours of conversations/reading/preparation behind us, we approached the Virtual Chairman.
What came next was a very honest, incredibly hard hitting reality check on our plan. The disconnect between our understanding and the reality of business, particularly in respect of our financial forecasts, meant we were suddenly confronted by the significant issues that laid within it, issues which only someone with the experience behind them as the Virtual Chairman has, could bring to light. Our understanding of the business was through the eyes of employees. There were a host of ‘unknown unknowns’ which we didn’t even know existed yet but which the VC picked up on immediately. Primarily, our Profit & Loss, Balance Sheet and Cash Flow forecasts “did not relate to each other”. Once we pieced all the information together, the business, as we had conceived it, would not work. Wakeup call!!
Our plan was for my partner to provide the business’s services, I would do all administration and between us we would market the company. The Virtual Chairman explained the principles of capacity to us, explaining why our assumptions could not work. He then built a spreadsheet tool for us to ‘model’ capacity which exposed the problem and empowered us to solve it. Instead of a loss in the first year of business, this new model created markedly different sales figures leading to profits of £100K PLUS!! It was a tough process to have our baby pulled apart and put back together but, at the same time, what a revelation!
I spent a day with the Virtual Chairman building a financial forecast using his accounts system which he introduced to us. Whilst our original forecasts for Profit & Loss, Balance Sheets and Cash Flow were based on ‘best guesses’ (aka… we didn’t really know what the hell we were doing but it looked kind of like the picture in the book!), the Virtual Chairman worked with me through the plan year, month by month, inputting the detail and letting his accounts system compile the forecast reports. It was a big shift from the guessing game we were playing and developed strong outcomes that we could have confidence in.
This was the pivotal day. The first run through the year produced quite alarming results but I now understood his critique of the original plan. I began to understand the financial relationships, the causes and effects and I also learned how accounts actually work! I could now see the basis of his criticisms, which had initially felt quite uncomfortable. I could also see how to solve them for myself.
By the end of the day, the business we ‘designed’ was completely different to how I had imagined it. The sales forecast was double our original plan and the amount of capital required nearly trebled. That said, the profit forecast was vastly different too. Definitely a much better business! I had, through the course of the day, proved for myself how our initial assumptions could not have worked and arrived at a really exciting set of figures that I understood inside and out and could even analyse vocally.
Our initial resistance to change didn’t make things easy but, having worked through the numbers, I could see that starting without enough money – “undercapitalisation” in Virtual Chairman-speak – would have led to a lot of hard work for no output. We would have got there but much MUCH slower.
Applying that understanding over the coming days, my partner and I continued to evolve the model and ‘test it’ with different figures to see how things might shape up if sales or costs played out better and worse. We then ran it by the Virtual Chairman for a view. This time when he challenged our assumptions we were able to explain and justify them – in detail. We then set out to raise money, armed with robust figures and the knowledge to explain them.
Not only did the Virtual Chairman support us through complex capacity modelling and significant financial/accounting advice, he also coached us about broader business strategy, recruitment, efficient financial administration, branding and much else which really boosted our confidence in our business plan.
With capital in the bank, we took possession of our premises on which we spent two months refurbishing whilst we did pre-marketing. The Virtual Chairman’s approach to forecasting and his questioning had led us to try to consider EVERYTHING. We opened absolutely on schedule and our costs were less than 2% more than the forecast! Our pre-marketing results were AHEAD of forecast. The Virtual Chairman calls his forecasting “rehearsing”, and that is what it feels like.
Virtual Chairman Accounts can be used for forecasting and the actual bookkeeping. One huge advantage of this is that when we actually started the business, I already had 12 months condensed practice at bookkeeping. It is cloud-based so the Virtual Chairman is able to see what we are doing ‘live’.
If there are any issues in the accounts we just flag them up and the Virtual Chairman responds quickly to keep us on the right path. Our accounts are designed specifically for us as a business. We can even see an “overlay” of our original forecast with actual figures, showing as green when we are doing better than our forecast and any difference in the wrong direction shows red. Because we – us and the Virtual Chairman – watch this ‘live’ we can take corrective actions immediately. There haven’t been many variances – the majority of our Forecast v Actual dashboard is green. The Virtual Chairman also highlighted important criteria and ratios to watch and set up a graph to view them at a glance.
The actual business of marketing and delivering our services is working well too – these were the bits we had plenty of experience with, and ideas for how to do it better than where we had previously worked. We do not feel like we’re groping in the dark trying to start a business – we kind of went through all that during “rehearsal”. Clients frequently ask if we are part of a chain! “Not yet…” I think to myself!
The Virtual Chairman helped us identify and plug all and any gaps in our knowledge, and continues to do so now we’re up and running.
Virtual Chairman: When someone presents me with a plan that they have clearly put a great deal of effort into, with a tsunami of enthusiasm, it is always tricky to criticise it. It’s imperative to not only explain the problems but also show how to solve them. These guys had a good business idea and they’re very talented – it was only the plan that was at fault.
I was impressed how rapidly they raised the capital. My one reservation – which they vehemently defended – was the amount of sales they expected to achieve in a short space of time. They explained, again and again, their workings and trumped that with “in fact, we think we’ll beat them”.
As their premises were nearing completion I visited to take a look at what they had created. It is an extraordinary achievement, an enviable workspace by any standards. They were thrilled with their pre-marketing results too, and rightly so. When they opened, the first of those big five figure forecast numbers needed to be achieved …and they nailed it, within £300! Month two, true to their word, they beat forecast for the first time…