Don’t lose sight of your cash flow
Lack of cash is the number one cause of business failure. Period. The story is over. Here are some of the problems that can sink a new venture:
Growth that is not adequately funded
Inadequate record keeping
There is no review of the financial statement
No control of business assets
Infrastructure that is not necessary
Waiting for the payment of sales
Sacrificing cash flow in the short term for long-term growth
You may think that just because there is a sale, there will be cash.
Inventory expenditures
Strategy: Monitor your cash flow and protect it in any way you can. Cash flow is the root cause of all of these mistakes. You would not grow as fast if you did not have enough cash if your cash flow was under control. You would have good financial reports, and you’d review them on a regular base. You’d practice good governance and ensure that you didn’t spend more than you could afford. You’d want to make sure that your cash flow was working automatically before taking on new projects or expanding.
Cash flow is vital to your business. The following five mistakes are related to the first mistake.
Improper Management Accounts Receivable
The amount that you owe your customers is called accounts receivable. It is best to avoid accounts receivable altogether! Pay in advance or pay at the time of services.
Strategy Front-loading your collection efforts is a good idea if you have to collect accounts receivable. The longer you delay in collecting the money, the longer you will have to manage it. This is something that collection agencies are well aware of. It’s the reason they exist. Most businesses focus their efforts on collection only after 60 days. Imagine how effective it would have been if the same effort had been put into collecting the money as soon as possible after the service was provided.
Expansion
Overexpansion is a danger for those who plan. You expect more business, and you hire staff and invest in capital assets and extra space. All this growth happens without any revenue to pay for it. If the new company does indeed come, it may be too late. Your business is vulnerable.
Strategy Plan just-in-time growth. Be sure to monitor your cash flow and outsource when expanding. Take out short-term, small loans to ensure you have the cash flow to deal with all other aspects of expansion.
Spending too much time setting up instead of getting business
Some business owners prefer to have everything organized and planned before they begin. This is a wonderful skill, but it can also be fatal to a brand-new business. It’s often an excuse to avoid asking for a sale.
Strategy Sell First! You need to get money into the business. Otherwise, you won’t be able to run it. Before you can organize anything, you need to have money.
Selling by hour
It isn’t easy to build a Level Three business if all you are selling is your time. You are competing in a commoditized market if you only sell your time by the hour. Please find a way of capturing your value as a comprehensive solution pr, object result, or value proposition so you can charge for it independent of the time spent fulfilling.
You can also transition much more easily from a business at Level Two to a business at Level Three since you’re no longer doing the day-to-day business work.
Strategies: Find the unique value that you create through your work and ideas. Once you stop selling by the hour, you can easily transition to Level Three if you have a Level Two business or Level Two skill. Start by charging a fixed fee for the services. Then, systemize and optimize your service to ensure that your team, your technology, and your systems deliver on your promise while lowering your costs.
Finally, you can turn your knowledge into a product of information and sell it as a way to generate additional income.
Donating your expertise in a way that has no perceived value
Many professionals find this a difficult task. Prospects want to meet you for a consultation. In the free consultation, you want to impress them with a lot of information. This one-on-one consultation is your most expensive time, as you don’t have any leverage and haven’t received payment. You have no way of knowing if you will get a customer out of this deal.
Strategy Throughout your career, you’ve learned to ask the correct questions and analyze the client’s challenges and situation systematically. You can charge for the expertise and structure you bring to your clients. It will not only make you more cash because it is an additional revenue source but will also increase your closing rate in converting prospects to paying clients. Your new clients will also benefit from your added value by recognizing and appreciating the tangible value you deliver to them.