Starting a business is a cake walk compared to running a sustainable, profitable business. In the initial stages of getting your company up and running, you are on an adrenalin high.
Your passion and the excitement of doing something you had dreamed about for months or years, seeing that dream become a reality, can be intoxicating!
Sooner than later, however, the challenges of running a successful business hit and you find yourself struggling to balance all the demands a growing business requires.
Too many business owners direct their attention to driving sales into their business without a plan on how to manage the cash when it hits their bank account.
The frenzy of getting that next sale, managing the expectations of delivering the product or service, hiring the necessary staff to keep ahead of demand and putting in place the processes to create efficiencies are all consuming.
The reality is this. Managing your cash is your #1 job as a business owner.
A cash-strapped business will not grow. You as the owner will burn out. The company will go away. If you are worried about getting enough cash to run your business, here are 7 steps to consider early on in starting and running a business.
1. Improve sales ? you have to spend money to make money
I?m amazed at how many small business owners find little difference in marketing and sales. Or while they may understand the fundamental difference, they make no plan to actually land sales. They believe that their passion for their product or service will carry the day. I?ve had many business owners tell me ?if I can get in front of someone, I can sell them my product.? They rely on their personality not on an intentional sales plan. To ignite cash flow, a sales plan is critical. And selling everyday becomes a priority. If selling is not your strength, hire a sales coach. Do this before your cash becomes depleted to a point where you don?t have the resources to apply to your business.
2. Have a plan ? don?t shoot from the hip
When did planning become a bad word in business? I?ve heard more than one expert negate the impact of planning. Certainly making a plan you can implement is a challenge. Too many business plans are filled with dreams of grandeur but have no chance of becoming reality. A plan has to be based on facts and the more facts you have as you build a business the better decisions you make. And business owners who make good decisions succeed. I want business owners to make a plan based on where they are financially. If you have no cash today, then your plan goes out 2 weeks and includes how you are going to generate sales. If you have cash then your planning period could span 6 months. Create a plan based on your world today and make it real.
3. Increase prices ? you have to establish value
What is your pricing strategy? It starts with an understanding of what it costs to produce your product or service, includes understanding what your competitors are charging and has to include your ability to show value. Too often prices are set based on what the business owner ?thinks? the prospect will accept. They often devalue their service or product and that happens when they don?t know what that value is. Take the time to really understand the value of your product or service and be confident in the problem it solves for your audience.
4. Aggressively manage receivables ? do you have payment terms
Do your customers and clients know your payment terms? Are they listed in the small print that no one ever reads? Do you get frustrated when you don?t get paid on time? After sending an invoice it?s always a good idea to call to make sure the invoice was received and that the customer or client doesn?t have any questions. Making assumptions in this area can really squeeze your cash flow. Be aggressive when it comes to collecting what you are owed.
5. Create milestones ? alert the client on the value delivered
Want to avoid that feeling in the pit of your stomach when you send an invoice to a client and you aren?t sure they will pay it? At critical points in the delivery of your product or service you should check in with your customer or client to show them the value you have delivered. Don?t expect or assume they see it. If you do this regularly, you?ll never have an issue with payment.
6. Managing vendors ? maximize terms
If you are cash strapped, you have to protect your cash for as long as possible. That means maximizing terms for people you owe money to. If terms for payment are 30 days and you are sitting on cash and can pay it in advance, don?t. Always pay your bills, just don?t pay them before they are due.
7. Establish a credit line ? do this when receivables are strong
While credit lines are harder to establish today than they were even 6 years ago, that doesn?t mean they aren?t available. Every business owner should establish a strong relationship with their banker. If you are new at a bank, introduce yourself to the President. Think you are small potatoes? You aren?t and you need to establish relationships with key people at your bank. Your plan is to grow your business. They want to provide you with services where they earn interest. Be confident that your money is just as important as anyone else?s.
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The goal of every business is to make a profit. Is your business leaking profits? Are you working harder but not seeing the results on your bottom line at the end of each month? Visit www.destination-greatness.com and turn your growing business into a great business.
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