For many businesses cash flow is a major hindrance to achieving the hoped for growth. My first question to a new client is “what is the biggest problem you are currently facing?” Often times the answer is “cash flow, lack of working capital, or survival funds.” I know that unless that crisis issue is solved first, it will be in the way of every other thing that needs to be achieved to bring a business to profitability and sustainability.
Asking hard questions and expecting honest answers is part of the mentoring job. It’s important to determine how much survival time is available by looking at reserves and projected cash flow. Sometimes we have to create a cash flow projection as many small businesses work with their check book balance as the accounting system. It’s possible to create a simple income and expense statement in a very short time period. This may be expanded to a more permanent method but initially it gives us something to work with. Cash flow can be generated in a variety of ways and it’s important to know the time frame within which this has to be achieved. Methods for a quick cash infusion are different than a long term business income development plan.
Sometimes the business is in need of a new business and marketing plan and perhaps new products or services. If urgency is an issue we take a look at the key business factors: target market, benefits provided to that market, current marketing efforts and internal delivery system of the products or services that are being offered. By examining these key issues a short term cash flow plan can be devised and implemented. It’s important to note that this is only a temporary plan to allow time for building a solid foundation in all aspects of business growth.
There is no magic in crisis marketing and management; it doesn’t always work. Time is the governing factor as to whether the cash flow needed can be developed in the time allowed. An open mind is needed as the business owner will have to acknowledge that changes have to be made in many aspects of the existing business. Creating cash flow requires a “focused attitude” which usually involves more time and a structured work schedule. The mantra used is simple: every action has to lead to an increased bottom line. Yes, the basic business essential must still be performed, perhaps in a more efficient manner so that extra time can be allocated to the short term mission.
Creating short term cash flow takes a major commitment and a belief in the methods developed to get it. It’s amazing what can be accomplished when you step outside of your business and discuss solutions with your support partner.
There ain’t no rules around here! We’re trying to accomplish something! Thomas Edison
Nick J. Petra CFP