Crucial Skills For A Successful Business

There has been a lot of publicity recently about Rishi Sunak’s attempt to make school leavers better at maths. I use maths in my job every single day but it is addition and subtraction and ratios and other simple mathematics, all of which I had learned to do by the time I left primary school. I have never used algebra or equations in my work and, to the best of my knowledge, nor have any of my estate agency clients.

However, there is something else that I think we should definitely teach in schools and that is business sense. Over the last forty years, I have met a great many fantastic estate agents but only a small percentage of them are good businessmen and women. Those that have learned these skills, however, are many times richer than the rest.

I am constantly astonished at how few estate agents can read a balance sheet or properly understand their own accounts. These skills are fundamental to running a successful business but they are not taught in schools and most business owners who have learnt these skills have learned them from a book or from a previous employer. The absence of these skills makes it far harder to borrow money to grow a business or to assess whether an acquisition opportunity would be a good way to expand a business.

Another key skill is the ability to prepare a proper cashflow forecast. This is less important for a lettings business because the income is fairly constant throughout the year. However, it is essential for a sales business where the income is very seasonal. Even if the business is highly profitable, there will be a big hole in the cashflow in the first quarter of every year and without the cash reserves to get through this period, a business can get into serious financial trouble very quickly or even go bankrupt.

Another problem that I see constantly is a lack of understanding about how premises leases work. So many of my clients have been bullied into signing a long lease, sometimes up to 25 years with no break clause. This means that on a shop with a modest rent of £10,000 per annum, they are legally responsible for payments of £250,000 regardless of what happens to their business in the future. This massive liability will also make it very difficult for them to sell their business.

Another common problem is when business owners are bullied into giving personal guarantees. These might be requested by their landlord, their bank or sometimes even by suppliers of other equipment such as motor vehicles or photocopiers. Signing a personal guarantee is a very serious matter because it means that your home and everything else that you own is at risk. It should never be done lightly, if at all. However, so many business owners give a personal guarantee without thinking about it. In the event of the business failing, this could cost you everything.

Another common failing is a reluctance to pay for professional advice from properly qualified specialists. Every successful business owner that I have ever met has paid for advice from carefully chosen specialists during their career and they have chosen their advisors on quality, not cost. When they need legal advice, they go to a specialist HR solicitor or a specialist commercial property solicitor. They don’t ask for free advice from the solicitor who does most of their conveyancing work. When they need tax advice, they go to a specialist tax advisor instead of asking their accountant. Many accountants know very little about tax. The cost of this advice will be repaid many, many times over.

Another common trait of successful businesspeople is the quality of their record keeping. The best businesses can supply us with accurate and comprehensive information almost immediately. Others send us a carrier bag full of bits of paper and can’t provide even the most basic information such as a breakdown of the income and expenses. It’s not necessary for a business owner to attend to their own business administration. All that is needed is a business partner or a trusted employee who can carry out this work on their behalf. It is amazing, however, just how many businesses do not have this information.

If I had more time, I would love to run a course on this subject but my training days are over now. However, if you own a business or aspire to do so, I would urge you to spend some time reading about these crucial subjects or researching them online. You can also consider joining a local business forum where you can discuss such matters with other business owners in different sectors. These skills are not specific to estate agency, they apply to all businesses. Best of all, you could seek out a business mentor, preferably someone who has run a business themselves and has practical experience of these issues, not just theoretical knowledge. Such a person could be transformational to your business life and it is never too late to find one.

Adam Walker is a management consultant and business transfer agent who has specialised in the property sector for more than forty years.