Tag: cash flow

8 reasons your business is not growing, and it has nothing to do with sales, revenue, or profit

8 reasons your business is not growing, and it has nothing to do with sales, revenue, or profit

There are 30.2 million small businesses in the US, accounting for 99.9% of all businesses in the country. Even though they account for 99% of all business;

  • They employee less than half of the American workforce
  • The average annual business revenue is $46,978 
  • 86.3% of small business owners make less than $100,000 a year in income

It begs the question; what is holding back your small businesses from reaching its full potential and becoming multi-million dollar businesses. This series will discuss 8 reasons why your business may not be growing and the action you can take to fix it. Today we will discuss numbers one and two.

  1. Cash Flow
  2. Dependent Model 
  3. Supporting Relationships (Trust) 
  4. Waste/inefficiency
  5. Leverage 
  6. Lack of curiosity 
  7. Vision with a plan 
  8. A mirror 

Cash Flow

Cash flow is considered by many to number one business killer. There is a saying cash is king when it comes to your business; there is no more accurate statement. For those that don’t know this term:

 

The term cash flow refers to the net amount of cash and cash equivalents being transferred in and out of a company. Cash received represents inflows, while money spent represents outflows. A company’s ability to create value for shareholders is fundamentally determined by its ability to generate positive cash flows or, more specifically, to maximize long-term free cash flow (FCF). FCF is the cash generated by a company from its normal business operations after subtracting any money spent on capital expenditures (CapEx). (definition provided by Investopedia)

 

So how do companies get into cash flow trouble? 

  • Accounts receivable; you have provided service but have yet to receive the cash. Again, this usually comes down to your payment terms and your ability to collect whenever possible try to get full payment before or at least at the time of completion. 
  • Paying Bill First; we all hate owing people, but many businesses do not take advantage of the same payment terms. For example, if someone offers you net 30, 60 payment terms, take advantage of them and wait until the last opportunity to complete payment without accruing penalty. Also, consider renegotiating for a more favorable term.

There are many other ways to develop cash flow problems, but these are two of the biggest. Please take the time to review your cash flow statement & balance sheet see how your cash flow looks. Then, consider setting goals to improve your cash flow as a tool to increase the value of your company.

 

Dependent Model

Now that you have begun to conquer cash flow, the next step will be to make an independent business model. But, of course, you’re probably asking yourself what the hell does that means?

It means creating a business model that does not rely on you as the owner to push the buttons, pull the levers, provide the basic service. It is the philosophy of shifting from working in the business to working on the business. 

There are several reasons why owners struggle to make this transition; we will discuss a few today but remember there are many more, and it is up to create time to do the work and discover your cause and correct it. Today we will discuss the sphere of control.

This is a big one for most owners. At some point, you will get to the place where you can’t be everywhere at once and can’t interface with every client. This can be very tough because this usually means you need to hire middle management. It requires a different set of skills than the ones you have hired before but usually comes with a dip in profit. So what can you do about it?

The first step is to get organized and answer these two questions:

 

What do I need them to do?

Where is the information they need to get the job done stored?

 

Simply put, to create a stable sphere of control, you need to have a documented process with clear expectations, responsibilities, and most importantly, the information to be successful. The standard term for this is SOP’s (Standard Operating Procedures).

Creating your companies SOP’s or engaging these new hires in creating the first version can significantly reduce the mistakes, miscommunication, and headaches that occur.

I hope you have begun to see your opportunities to improve your business. As always, our fractional COO’s are here to help with these and all of your other operational challenges. Thanks for reading, and remember the best time change was yesterday, so you better change today. 

5 Killer Mistakes – Part 3: Up Cash Creek Without a Paddle

5 Killer Mistakes – Part 3: Up Cash Creek Without a Paddle

Now to conclude our killer mistakes series, we will talk about the worst mistake you can make that will not only cost your clients but might even cost you your company. Today we’re going to talk about the fifth killer mistake: Cash Flow.

Even when business is good, there’s still a chance of running out of cash flow. You have to always be prepared for a slow in sales or a surge in expenses. One of the keys to balancing your cash flow is to get your clients to pay on time. Managing your cash flow can seem like a nightmare but is essential to a successful business.

Here are some tips to speed up the payment process:

  • Always send invoices on time and adjust your records for potential audits.
  • Learn how the client processes payments on their side and find out precisely where to send invoices.
  • Find out who’s in charge of processing orders and payments so you know who to contact if needed.
  • Have a follow-up procedure in place, just in case.
  • As a last resort, call your contact to ask questions.
  • Always make sure your invoices are correct before sending them out.

You also need to make sure your cash flow is protected. You can do this by:

  • Always knowing which accounts need to be paid and when.
  • Negotiate with your suppliers for the lowest cost possible.
  • Have a bank contingency plan in place.
  • Build your investor network.
  • Having a weekly, not monthly, cash flow management system.

These are all great ways to protect the cash flow of your business and be able to serve your clients. However, these last few lessons are all about finding and maintaining your big fish clients. These clients are essential to your success, and you need to take the time to work through each of these steps carefully and correctly for the best success.

I am here to help with any of the processes we have discussed; feel free to ask me how to get access to a wealth of Free tools and resources and our business coaching staff.

Take the One Thing Challenge!

If you feel frustrated with sales and marketing, the reason may not be a lack of effort or investment. Instead, the problem may be inadequate or inefficient service delivery to your customers. 

Remember, the best time to make a change was yesterday, so you better get started today! What is the one thing you need to change or do differently that would make you more successful?

Complete this quick form, and I will respond within 48hr with one action you can take to make your one thing a reality?