One of the biggest concerns whilst in the start-up stage of a business is cashflow. How can the owner make ends meet? How can they pay the business running costs as well as their own household bills, feed their family, and put petrol in the car to go and earn more money?
It’s a valid concern. A large proportion of businesses that fail do so due to cashflow problems. The statistics are quite staggering. 20% fold in the first year and, within 3 years, 50 per cent have closed their doors.
So how can you ensure that you have enough money coming in to pay not only the business’ bills but yours too? And have a pipeline of ‘monies in’ stretching far ahead, not just for the next week or two.
- Invest some time in a detailed and well researched cash-flow forecast. And once it’s written, go back and update each month with the actual figures so that you can see where you were right, where you were wrong – and where you can improve the financial health of your business. Of course, this then gives you a great basis on which to calculate next year’s forecasts.
- Look at tightening up on your payment terms. If you’re offering 30 days, look at cutting back to 21 or 14 (don’t forget to update any contracts and to give clients plenty of notice). Perhaps offer a discount or a little extra that costs next to nothing, in return for prompt payment? Everyone likes something for nothing.
- Re-evaluate where your money is going and whether you can release it or save it. Do you have cash tied up in stock that isn’t selling quickly enough? Are you paying over the odds for services? Can you save or even stop spending money in particular areas? Give your finances an overhaul and you’ll be surprised where you can make savings.
- Once you’ve made some savings, and identified where your money is going, get on top of your sales pipeline. Make regular new customer calls, think of innovative ways of keeping in the forefront of current customers minds and continually look for new ways of making new contacts. More customers and more sales add up to the perfect way of making more money!
Once you have the structures and processes in place, make sure you diarise regular time for careful monitoring from thereon in to ensure that your plans don’t start to unwind. Build on your successes and develop regular revenue streams
And what if your business struggles, and you find yourself adding to the yearly statistics? In the UK we have an aversion to the word fail. We see it as a bad thing; as an indictment of ourselves and our abilities. Me? I see it as a platform of growth. We can’t achieve if we don’t get things wrong. We can’t move forwards, onwards and upwards if we don’t occasionally fall over. The key is to learn how to dust yourself off, and get back up and start again.
Ali Golds, CEO Fuse www.fuseyourbusiness.com