28 Feb, 2011
6 Strategies for preventing your business from getting into hot water by Jamie Constable
Most businesses don’t make it beyond 5 years.
Where are you in your entrepreneurial journey?
Whatever the size of your company, from one employee (you) upwards, you need to maintain regular contact with your customers, retain them with a great service and delivery and keep them paying on time.
Without cash flow you do not have room to manoeuvre your business.
Here are 6 strategies for staying out of hot water:
Be mindful about money
- Highlight your payment terms on the invoice
- Appoint the right person to do your credit control (you, the business owner are not the best person to do this)
- Keep a tight eye on your finances .. don’t bury your head under the bills
- Avoid paying out cash too quickly yet stick to payment terms your suppliers offer you
- Build a great reputation with your clients .. be spontaneous too
- Consider offering a discount incentive for large invoices you raise
- Re-negotiate terms on a regular basis with suppliers (they know you want the best deal to keep you as their client)
When is a good client actually not?
- ‘Profit is sanity, turnover in vanity’
- Look at the numbers on what seems a fantastic new client contract. When you analyse it properly and drop the excitement for a moment, you might find you wouldn’t actually make enough profit once you take into account the people and resources to do the job
- It’s OK to say no thanks – a business isn’t a charity unless it is
- Don’t get dazzled by big named clients for vanity sake .. every client gain has to fit into your forecasted profit margins
- Do your checks before you sign a deal to ensure the ‘new client’ is good for the money
- A client isn’t a client unless they pay you
Add a healthy dose of realism to your day
You cannot base your cash projections on rose tinted glasses targets. Set your sales targets as low as you think realistic – “and even on this lower projection we make enough profit.”
Check to make sure your overheads work for that low sales target, not for your high sales target.
This is a fundamental error of over optimistic thinking and one of the reasons businesses fail. The bottom line maths is wrong.
A business without the right people to do the tasks is doomed. Even if you are the sole person in your venture .. you could unwittingly be helping the business to underperform.
How can this be, you ask? Just because you own the business doesn’t make you a good business owner with the right skills to do all the functions well.
At the heart of success is mindset and skillset. Adjust yours from an honest perspective and only ever employ people with the right skillset and mindset to complement yours ie: to do what you can’t do well. Remember our friend Gill Fielding’s wise words: “Only do the things that only you can only do.”
Take fast action where speed is required
If your turnover is at a cliff-edge location and you know this to be true … you must take immediate action and slash overheads and company spending. This is a case for surgery, not a prescription.
- Make the financial side of the business a lean, mean fighting machine
- Make the customer service and sales side superlative
- Go for gold with your sales and marketing efforts with attitude on a shoestring
- Do everything you can to collect outstanding monies/cut credit
- Do all the right kinds of elegant PR you can, for example, use social media for showcasing what you do and could become more well known for faster than jelly sets
- Keep your company visibility up Up UP
Praise where praise is required
We all have people that make our business what it is. When your stars shine brightly within your business and externally to your clients, make praise and rewards part of your leadership style. Good staff are hard to find. Recruiting staff is expensive. If staff leave with your business knowledge in their head and not in your business systems, more – fool – you.
As the business grows, invest in the right fit good people. Anything less than perfect placement is a false economy.
Jamie Constable is an EBA Millionaire Mentor.