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How to Start Generating Positive Cash Flow....Cash Flow, tight Management Control and the importance of Business Planning are so fundamental it's amazing what you sometimes see and what it means. I came across two short articles on facing pages in the same journal. They said so much about why people fail in business and leave the question - do people ever learn? One article gave statistics on businesses failing from cash flow problems and the other was about a business that went down because it's single largest customer placed it's custom elsewhere. In summary it goes like this; A survey revealed that in the UK 100,000 businesses fail each year because their owners fail to do any business planning. 25% of firms never set any financial targets. 35% have never set aside funds for employee development. 20% admitted to beginning to plan when it was too late. 50% blamed this on not having enough time. They were surprised to learn that these causes of failure were greater than adverse trading conditions. Which means they did not understand the vital importance of business planning, which when done correctly projects sales and cash flow for the business allied to a sound marketing plan. Fundamentally controlling cash is dependent on a form of long term and day to day planning. The failed business was a very cost sensitive business (that implies a vital need to control cash tightly) that did sub contract machining for the mining industry. It had been established 49 years and employed 12 people. When it's single biggest customer decided to go to another supplier, the business went bust! Didn't they have a marketing plan to become less reliant on that single customer? The owner has now re started as a 'sole trader' doing the same subcontract machining and 'working all hours' to survive. Doing what he did before probably without any change. He says he has learned his lesson and will not carry out work for businesses in the sector of the company that dropped him and is now working for other businesses. What's the logic of that? Are all businesses in that sector likely to be bad clients? In other words he is virtually back to square one doing what he did before. I admire his tenacity and wish him well for the future but these two tales tell us so much about what should be applied as normal business practice.
Never rely on a single customer. Never stop marketing. Prepare an annual business plan with costed goals and timed targets paying particular attention to cash flow. On a daily basis plan and manage the flow of cash of the business against that plan and plans for a shorter time frame, daily, weekly, monthly as the need determines and review progress making adjustments in accordance with the trading position. At all times control cash flow and only spend when you can afford to. Simple but so effective and as important as any other 'day to day' task. My experience is that many business owners only have a job working for them selves. They do tasks 'in the business' and though this is necessary when starting out the objective must be to develop the business by working 'on it' not 'in it'. Which can only mean planning and setting out to achieve where you want to take the business. If our business owner had set an annual business plan with costed marketing objectives to acquire one new customer in each of the 49 years history - would the business have gone bust? I believe not. In reality it would be a sound business, have a broad customer base with a strong positive cash position. It is almost certain that in many of those years he was busy working 'in' the business not 'on' it. Probably ignoring changing external conditions all the while believing his relationships with his main customer were above competitive pressures No matter what type of business you are in the message is straight forward. Continuous, targeted and costed marketing as part of a sound business plan is as vital as control of cash flow. No customers, no cash flow, no business as our now one man business knows. Tip: Look, Listen, Learn and take strong firm action. Do the thing you think you cannot do, Second Tip; Subscribe now for your regular FREE newsletter bringing you business building help.
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