The Top Ten Ways to Improve Your Cash Flow

When the economy is in turmoil, it’s not just big businesses that need to worry about their cash flow. Smaller companies also struggle with keeping up with expenses when sales fall and they cannot afford any long-term debt obligations or future spending commitments for new equipment which could help them get through these tough times more easily than if left on an empty wallet alone

A business coach can provide you guidance on how best to manage your finances so as avoid going under before circumstances improve – all while helping ensure survival during difficult economic periods

Bootstrapping in Businesscash flow

Small business owners, listen up! Bootstrapping is a term you need to know if you’re looking for ways to start and run your business on a tight budget. Bootstrapping (the act of starting and running a business with little capital) can be a positive or negative thing, depending on your perspective. On the plus side, bootstrapping can force you to be more mindful of your spending and help you stay afloat during tough times. On the other hand, being under-capitalized is one of the leading causes of business failure. If you’re thinking of bootstrapping your business, it’s important to be aware of the pros and cons before making a final decision.

The pros of bootstrapping:

  1. It can force you to be more mindful of your spending.
  2. It can help you stay afloat during tough times.
  3. It can make you more resourceful.
  4. It can help you better understand your customers and what they want/need.

The cons of bootstrapping:

  1. You may not have enough capital to get your business off the ground.
  2. You may have to work longer hours to make ends meet.
  3. You may have to forgo some luxuries, like hiring help or renting office space.
  4. You may put your personal credit at risk.

Covering Your Monthly Business Obligations

As a business owner, you know that even when you’re bringing in customers left and right, expenses can still get the best of you. You have weekly and monthly fixed expenses- think: payroll, loans, rent, utilities, phone bills, and advertising costs- as well as variable ones which adjust according to your sales. For example: if the business is booming and you’ve had to bring on extra hourly staff for the increased demand or paid more in credit card fees because of additional inventory ordered; those would be categorized under variable spending.

Sales may vary, and there can sometimes be a delay in receiving payment. If you have a business that only operates during certain seasons, one bad peak season could put you under for good. Usually, fixed expenses don’t wait for the cash to come flooding in from sales; they arrive on schedule whether or not we’re ready for them. I learned this the hard way when my former business saw a 400% increase in revenue from our off-peak season to our peak season. Needless to say, we had to pick up some extra tricks for managing cash flow!

cash flow

  1. Have a cash cushion – A cash cushion is essentially an emergency fund for your business. It’s there to help you cover unexpected costs or tide you over during lean periods. I recommend having 3-6 months’ worth of fixed expenses set aside in a separate account that you only dip into in case of an emergency.
  2. Manage your invoices – When you’re busy, it’s easy to let invoicing fall by the wayside. But staying on top of your invoicing is crucial to maintaining a healthy cash flow. Make sure you’re sending out invoices as soon as the work is completed and following up regularly to ensure they’re being paid on time.
  3. Get creative with financing – If you find yourself in a tight spot, there are a number of alternative financing options available to small businesses. From lines of credit to accounts receivable factoring, there’s likely a solution that will work for you. Don’t be afraid to get creative and explore all your options.

By following these tips, you can help ensure that your business is able to weather any storm. Fixed expenses are always going to be a part of doing business, but by being prepared and mindful of your cash flow, you can avoid any major bumps in the road.

Pro-Tip: Grab 30 minutes on my calendar to ask any questions you have about business coaching. I’ve been a business coach (and business broker) for over 20 years. I also have a business coach of my own, so I know what successful coaching looks like on both sides of the table.~ Alan Melton, Small Business Coach Associates


Getting Started With Improving Cash Flow

When you’re trying to improve your business’ cash flow, you need to predict two things: how much money you’ll bring in from sales this month, and how much your expenses will be (fixed and variable). If you expect to have more money coming in than going out, and you deliver on that prediction, you have positive cash flow. You always want to be cash-flow positive, but that can be tough when you’re just starting out and growing your business. You don’t want to overspend, especially if your sales aren’t growing as predicted.

Here is my top ten list of ways to improve your cash flow:

 

1.    Implement cash flow budgeting and management.

Budgeting and managing your cash flow are crucial to the success of your business. By doing this monthly, you can keep track of your sales and expenses, and make changes accordingly. If your sales are falling short, cut back on your expenses. This will help ensure that your business stays afloat.

If your business is struggling to make ends meet, it’s time to take a close look at your cash flow. By creating a budget and tracking your spending, you can get a better handle on where your money is going. If you see that you’re spending more than you’re bringing in, it’s time to cut back on expenses. This will help you keep your business afloat.

2.    Promote credit card and cash payment at the time of the order.

If you are selling a product or service, it is best to collect payment upfront by credit card or cash. This ensures that you will be paid for your work and prevents any issues with customers who may try to avoid paying after the product or service has been rendered. If a customer asks for terms, get their credit card number as security for payment. This way, you can be sure that you will receive payment for your work.

3.    Improve payment terms on extended projects or services.

When you are working on an extended project or service, it is crucial that you change your payment terms. This means receiving a large deposit at the time of purchase, and then additional payments throughout the duration of the contract. Do not hand over the final product until after you have been paid completely. In doing this, you will guarantee that you are fairly compensated for your work.

4.    Make a portion of your payroll variable.

A great method to lessen your overhead costs is to make a section of your payroll variable. What this means is that you only pay employees when you need them, and their salaries correlate with sales activity. When business is booming, you can hire independent contractors or seasonal workers to assist; however, during slower times their hours will be cut back or eliminated. Consequently, by making your payroll adjustable according to needs, you are able to decrease expenses and sync staffing requirements with business activity.

5.    Discounts for timely payments.

You can often encourage customers to pay their invoices on time by offering a discount. For example, many businesses offer a 1-2% discount for payments made within 30 days. This not only incentivizes customers but also helps improve the business’s cash flow.

6.    Negotiate extended payment cycles with vendors during peak seasons.

cash flow

By reaching out to your vendors and negotiating extended payment cycles before your busy season, you can avoid any potential issues with late payments. If your vendor is not willing or able to be flexible, then it might be time to look for a new supplier that meets your needs better.

7.    Do a credit check on new customers.

As a small business owner, it’s important to do a credit check on new customers. This will help you determine whether or not they are likely to pay their invoices on time. You can either do this yourself or hire a credit reporting agency to do it for you. Additionally, you may want to consider buying credit insurance, which will cover you in the event that a customer does not pay their invoice.

8.    Track inventory and supplies.

In order to keep track of inventory and supplies, it is important to identify waste and make improvements to save money. This can be done by closely monitoring stock levels and implementing systems to optimize inventory management. By doing so, businesses can avoid over-ordering or running out of necessary items. Additionally, reducing waste can cut down on costs associated with storage and disposal.

Another way to save money is by improving the organization and storage of inventory. This can minimize the amount of time needed to locate items and make it easier to keep track of stock levels. Additionally, well-organized inventory can help businesses avoid damage or loss of valuable supplies. By taking these steps, businesses can improve their inventory management and save money in the long run.

Pro-Tip: Grab 30 minutes on my calendar to ask any questions you have about business coaching. I’ve been a business coach (and business broker) for over 20 years. I also have a business coach of my own, so I know what successful coaching looks like on both sides of the table.~ Alan Melton, Small Business Coach Associates

9.    Shorten product or service cycle times.

If you can find ways to shorten the product or service cycle time, you’ll get paid faster. This could involve improving your manufacturing process, being more efficient in your delivery, or finding ways to streamline your operations. By doing this, you can improve your cash flow and keep your business running smoothly. In order for it to make sense, you could add: If you are a business owner it can be difficult to devote time to all of the different tasks required of you. Having online business banking solutions can help streamline your banking needs and save you a significant amount of time throughout the week. Online banking allows for payments, money transfers, balance checks, statement reviews, and many other services so that you don’t have to wait in long lines or drive around town trying to pay bills.

10.    Have a backup plan and emergency strategies.

A backup plan is essential in preparing for the unknown. This could include having cash on hand, obtaining a line of credit from your bank, or keeping some low-interest credit cards with zero balance.
cash flow

Coaching Client Adds $176,000 in Cash Flow

We were recently working with a client that had a severe cash-flow shortage. We identified seven areas of improvement that added $176,000 to his bottom line and dramatically improved his cash flow in 30 days. Although his cash flow had been poor for ten years, we were able to solve his problem in three meetings with the owner and his staff!

The client was amazed at how quickly we were able to turn around his cash flow shortage. He’d been struggling for years, but with our help, he was able to add $176,000 to his bottom line in just 30 days! We identified seven areas of improvement and worked closely with the owner and his staff to implement them. This was a huge success story and we’re so proud to have been able to help!

Conclusion

A wise saying is “you get what you focus on.” Cash flow management is important to keeping your business running smoothly and stressed-free. By investing some time each month in cash flow management, you can ensure that your business has the cash it needs to keep growing and seizing opportunities as they come. Having a handle on your cash flow will make you “The Cash King” and help you lead your business to success.

Questions about our small business coaching services?

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How To Manage Your Business Working Capital

working-capital

Manage Your Business Working Capital

Managing your business’ working capital will help you prevent cash flow problems, improve your assets’ liquidity, and increase your return of investment, among many things. Properly done, it will spur your company’s growth, leading to inevitable success.

However, business working capital management is easier said than done. There is a lot of information to take into consideration. You might not know where to start! So, to make your life easier,

Here Are Steps That Will Help You Become A Good Steward For Your Company’s Finances.

Minimize Your Inventory to Help Your Working Capital

Having your own inventory is considered as an asset by many entrepreneurs. But if you want to free up your company’s cash flow and enjoy better net working capital, you need to optimize it. That means increasing inventory turnover cycles, avoiding stockpiling and reducing slow-moving inventories altogether. An asset tracking can be useful in achieving these goals by providing valuable insights into inventory levels, usage patterns, and areas for cost savings

money management

To minimize your inventory, most high performing businesses recommend relying on pull inventory methods like drop-shipping and the just-in-time strategy. These techniques usually involve buying the products (or the materials needed to manufacture it) based on demand. In short, you have to get the goods after your customers have ordered it. This will help significantly reduce your company’s expenses, ensuring your working capital is properly utilized.

At the same time, you need to boost your business’ inventory turnover cycles or days inventory outstanding (DIO) if you want to properly manage your working capital. This means minimizing the days you hold a product before selling it to a customer. To achieve this, you need to constantly measure the turnover rates, compare it to your competitors’, and introduce techniques to minimize DIO.

Switch to Electronic Payment Systems

To effectively manage your business working capital, you need to be able to send out invoices quickly. By introducing an electronic payment system to your company, you can achieve that plus more.

Converting to electronic payables and receivables comes with numerous benefits. For instance, it gets rid of the inefficiency caused by manual processing, lost receipts, and high invoice demands. Also, electronic payment systems can be automated, allowing you to send invoices more promptly. As an added bonus, this opens opportunities for your business to get more favorable capital payment terms and other perks.

Improve Your Collection Processes

Collecting invoices is vital for maintaining your cash flow and shortening your working capital cycle. Unfortunately, this is also a process in which every business runs into snags or delays. It’s not uncommon for customers and clients to try and delay payments as they try to manage their own cash flows.

A good collection process can give your working capital cycle a significant boost. It guarantees that most, if not all, of your pending invoices get paid within the term set by the agreements with your customers. A clear collection system also ensures that invoices are assigned to the right specialist, i.e. overdue accounts must go to collectors that specialize on collecting late payments. 

Take a look at your existing collection workflow and see if there are segments that need to be improved. Try to check if there is a clear schedule of reminders and actions that should be taken as the customer’s due date approaches. Make sure everyone is on the same page with regards to collection goals, and how important the process is to the business

Introduce New Payment Options for your Customers

If you’ve stuck to only one payment option for your clients or customers, you’re shooting yourself in the foot. In this age, digital solutions now exist for processing payments in addition to traditional check or cash payments to the bank. Your business should be leveraging these digital solutions because they have long-term benefits to offer.

One of these advantages is convenience. Digital wallets, for instance, provide a means for both consumers and businesses to settle obligations without having to meet. Both parties just need an account at these e-wallets so they can send and receive funds with one another. Transactions are instantaneous, eliminating the usual processing time in traditional payment methods. 

Making multiple payment options available for your customers can also potentially speed up the collection process. They also reduce stress on both your collection teams and the client. With the instant receipt of funds made possible by digital wallets, for instance, customers have almost zero excuses for late payments.

Pay Lenders and Suppliers on Time to Help Your Working Capital

solar power

Paying vendors on time is another great way to efficiently handle your working capital. Not only does it ensure proper cash flow, but it also allows you to instill discipline in your business whenever it makes payments. Additionally, it makes suppliers feel more at ease with your company, thus making them more flexible when it comes to discussing prices and contract terms.

So assess your payment terms with your supplier or debtor, and check the agreed-upon window for paying for their goods and services. If the time frame seems too long, then you might want to discuss it with them so you can shorten it. Just make sure the payments you make stays within your company’s budget. Simultaneously, you can reduce potential bad debts by implementing rigorous credit control procedures in your business.

Making sure that all your payments to lenders and suppliers are on time will also improve your credit score tremendously. A good credit score gives you access to more financing options. A positive standing will make sure that you can obtain financial assistance anytime the need arises.

Get Adequate Financial Assistance

Business loans can help you improve your business’ working capital management in several ways. For example, short-term loans can help give your company a financial boost in case its cash flow is acting up. While this is essentially a band-aid solution, it will fund your operations long enough for you to fix your current financial issues.

Or you can opt for long-term business loans to acquire fixed assets and stabilize your company’s cash flow. You can then use the recently fixed cash flow to repay the loans and any other unsettled expenditures. This will ultimately lead to better relationships with lenders, allowing you to get more flexible terms in the future.

Alternatively, you can consider talking to alternative lenders. Unlike banks, these debtors tend to offer more generous deals for their financial services. Depending on where you go, you could end up enjoying more money borrowed, less interest, and generous repayment terms. For instance, you could receive a cash advance against your pending invoices by entering into a accounts receivable factoring agreement with a lender.

Control Your Expenses Carefully

Last but not least, learn how to monitor and curb your company’s expenditures. To diligently track your business’ expenses, you need to gather as much data as you can about your historic costs. That way, you’ll be able to make a plan to reduce future expenditures.

You should also manage your business’ variable costs. You can do this by taking a look at your company’s previous variable expenses and calculating how much they contribute to the overall expenditures. Then set budgets for each of these expenses and implement it during the following months. If you’re running a large company, then you shouldn’t ignore small expenses. Despite their size, they can easily accumulate and affect your working capital.

investments

You might also want to think about setting up dashboards. Dashboards allow you to take a snapshot of a specific group of data with just a click of a mouse. You could take advantage of this capability to gain an overview of your business’ cash flow anytime you need to. These software solutions help you make informed decisions when it comes to managing your cash flow and working capital. 

Learn How to Manage Your Working Capital

Through proper business working capital management, you can ensure your company’s financial health, maximize its operational efficiency, and improve its profitability. An optimized working capital cycle, together with cash flow, is key to ensuring your business’ survival amidst a very competitive landscape. The tips outlined above should help in improving your working capital cycle.

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5 Tips for Negotiating with Suppliers

negotiating with suppliers

How do you handle negotiating with suppliers? Any business owner needs to have prerequisite skill requirements and one of the most important and actually the most critical, we can say, is communication skills. In leading a business and pursuing its goals and objectives, effective communication is key. Whether you are speaking or writing to colleagues, clients, or your suppliers, the art of communication needs to be applied to ensure a smooth flow of conversation, elicit adherence to your command or order, and eventually materialize your intent and desired outcomes. Fostering good business communication skills pay off with a healthy working relationship between you and your stakeholders. This the ultimate roadway to improving everyone’s productivity, efficiency, and morale.

The biggest challenge, however, in business communication is the need for negotiating. In a textbook definition, negotiations are a way to resolve disputes and it is often associated with various terminologies like settlement, bargaining, agreement, and collaboration. While these words pose a heavy and taxing connotation, they should be taken lightly and positively as any negotiation indicates a chance to turn tables and leverage the business game. A successful negotiation, especially with suppliers, can have a positive effect on your company’s financial gains or simply improve the quality of the goods and services you deliver.

Often, supplier negotiations are a little tricky and are tagged a mind game because suppliers are put at a superior level in consideration of their power over the buyer. Because of this, they might take control of your dealings by pressuring you, raising prices, lowering the quality of the products, or reduce product availability.

Luckily, you have this list of negotiating tips to ensure you can shake hands with your suppliers and close a deal that is favorable to you.

5 Easy Steps to Negotiating With Suppliers

Invest in rapport and positive feedback.

Like you would with a client, you must also put an effort into building a good work relationship with your suppliers. In building rapport, suppliers can be provided with the idea that it is not only their business that is of interest to you but their professional companionship as well. Any kind of relationship guarantees loyalty and this is a great way to surface that subliminally. Meet your supplier face-to-face and keep your conversation within a 60-40 rate. Sixty percent business and forty percent personal. Halfway through, throw in positive feedbacks you have heard and what impressed you just so that he knows your considerations in tapping them. Perhaps you can also express that you are interested in how they manufacture their goods so you can be invited over or their plans for development and expansion. While you are at it, you can reciprocate this with an invitation to some of your company parties or events to ensure he understands that you do not just always mean business but a genuine partnership.

Do your research and expand your options.

However, keep it to yourself. Let your research be your guide whether or not you are making a good deal out of your negotiations with your supplier. Research should always be taken to your advantage especially for your position in the conversation. It pays to know if the price is worth negotiating for or when the other suppliers will not make it hard for you. It is still business anyway. If it is a hard sell or maybe after 2 or 3 meetings with them, respectfully mention that you will also get a quote from other suppliers and make decisions based on competitive pricing. That is if you find them too stiff or tough.

Tell the supplier what is in your deal for them.

In your meetings, you might want to cite ways where both of you can benefit from the deal you are offering and you can also indicate this in your agreement. Suppliers like early payers so you can capitalize on this advantage in your offer. Tell them you can pay early, give a huge fraction of the sum for the down payment, have him offer a discount for bulk purchases, and other ways that he might find a great benefit from. In terms of delivery, maybe he can let you have the price you want if you will be the one to shoulder and arrange the pick up of goods on your own. If you can place an order early and do not require fast turnarounds, it is more likely that they will keep your business. If you can make them understand that dealing with you can be much lighter than their other partners, it will be easier for them to accept your offer.

Be straightforward about your offer.

Suppliers appreciate it when you are straightforward especially if they are always after time and money. If they value any sale, they would make it possible with your deal. After your introduction, you can tell them how much your budget is. This can help them make a plan on how they can work on it and help you. Let them know the areas where you can allow a healthy compromise.

Allow time for both of you to think it through.

Normally, suppliers would ask you about your lead time and schedule and you might want to share with them an honest and accurate timetable so they can also provide you with their projection. In your meetings with them, ensure that all the information you think they might need in making a decision is provided so that they can go back to their office and specifically tailor an offer for you. Allow them time to process everything. Of course, they do not want to say yes right away and then bail out of it. Take this time, as well, to make a backup plan in case they might turn your offer down.

Negotiating with suppliers is vital to the success of your business. Without them, you will not have anything to deliver to your clients. This is why you must let your silver tongue roll and do its magic. Be mindful of how they react to your statements and ensure each meeting warrants a negotiation. If you noticed a certain disinterest at the onset of your conversation, you might have a hard time but if it seemed like they are open to some compromise, the negotiation will be worth the try.

Here’s an article about improving your cash in your business.

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Natasha Barbeyto-Castaño is a beauty, wellness, and lifestyle writer. She took up Fashion Design and Merchandising in college and was hired as a personal shopper for a high-end department store right after graduating. Writing for the beauty and fashion sections of a society magazine and being head of content for a clothing company kept her busy before getting married and having a little boy. She learned to read at the age of 3 and wants her son to grow up sharing the same love for books. Nowadays, this organic wellness nut and attachment parenting advocate balances working from home and being a housewife. She enjoys watching psychological thrillers and foreign-language films with her husband during her free time.

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How a Cash Gap Plan Saves You From a Shortfall (and Five Ways to Do One)

Cash Gap

A cash gap plan is a relatively simple and very necessary method of managing the flow of money into and out of your business. It’s the only way a business owner can rest easy. You’ll know that you’ll have enough money for payroll, bills, and needed expenditures.

A cash gap is the number of days between paying for goods and services and the payment from your customers.

Cash flow is key to business survival whether your business is growing or struggling.

In any small business, resources (money, inventory, material assets) are scarce. So you want to use them to the fullest advantage. It follows that you need to ensure that your cash gap is as low as possible. You manage what you have against what you are owed. With a low cash gap, you can use the cash to repay debt and to invest in the growth of your business.

There are some well-known companies that actually have a negative cash gap! Think Amazon and Dell Computers. These businesses collect their money before they ship products. The closer you can move your business in that direction, the stronger your business will be.

To maintain a low cash gap, you must set up a plan that’s carefully monitored by your management team.

Essentials for Managing the Cash Gap

Here are four fundamentals which managers can employ to keep the deficit as low as possible.

Cash Gap

  1. Controlling and Reducing Inventory

One way for managers to keep the cash gap low is to take a closer look at inventory in order to minimize your investment. Let’s say that you have slow-moving items in the warehouse. This could be due to seasonal demand, improvements in materials, or other factors. You can reduce this cost burden by:

  • selling the items for scrap
  • trading them with a competitor or supplier
  • offering a special sale
  • returning them for credit

In addition, managers can review company purchasing policies. For example, they can try to get consignment arrangements in exchange for longer-term contracts.

    2. Speeding Up Receivables

You know that the faster you receive remittance for products and services, the lower the cash gap.

Encourage prompt payments from customers by following up with reminder phone calls, emails, or past-due letters. Before you make a sale, you can offer discounts for early payment. You can also have payment methods like PayPal or Square to ensure a fast turnaround on money owed.

You can also assess if invoice delays are happening due to a lack of communication or processes within the billing, sale, or production staff. Addressing these issues will certainly improve your situation.

Cash Gap

  1. Lowering Days in Accounts Receivable

Most small businesses allow their customers to pay within 30 days. While this varies from industry to industry, you can try to lower your payment terms. For example, a manager can offer a small discount if the customer pays within five days.

In the case of international customers or historically slow-paying clients, consider getting a deposit or transfer before you provide a service or manufacture a product.

Managers should continually review accounts for slow-paying customers. If the trend is increasing for this type of customer, consider engaging a collection agency.

  1. Negotiating Better Terms With Your Suppliers

The next way to improve your cash gap is to negotiate better payment terms with your suppliers. Perhaps you can go from paying in 30 days to 45 days. You can inform your suppliers that your customers want longer terms and that you have a cash gap that you need to improve.

  1. Planning Ahead

When you have a small business, it will always be important to plan ahead. Even though you take all the measures possible to avoid problems, you may not lower the cash gap as much as you would like. So, it is always best to have good cash reserves available just in case you may need to use it.

Summary

A higher cash gap can handicap your business, even to the point of failure. There are several tactics that a company can do to prevent such a gap. You can collect payments from your clients sooner, renegotiate your buying contracts with suppliers, or purge stale inventory.

Conclusion

Be sure to evaluate your plan regularly. This practice will ensure that you’ve covered all the available ways to decrease the likelihood of a cash gap.

Have you tried to implement a cash gap plan? If so, how did it work for you? (Answer below in the comments section)

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Achieve Your Goals, Dreams, and Aspirations Through Your Company

Achieve Your Goals

What do you expect from your business? If you are like most business owners, you would probably say wealth. Unfortunately, the trap many small business owners  fall into is that they may achieve that goal, but in the process, they sacrifice their families, their health, and their happiness. A price is always paid in the achievement of any significant goal. The scriptures tell us, “We reap what we sow.” In order to reach our dreams and goals, we must first define what they are, then develop a strategy and take activities to achieve them.

Why are some people successful in only one area of their life, rather than in all areas?

Achieve Your GoalsHow to Achieve Your Goals: Plan and Take Action!

The leading experts say the reason for the lack of success in an area of our life is so obvious, its almost ridiculous. We simply do not plan and take action to be successful in that area. The wealthy business owner who sacrificed everything else simply did not take any action to improve the condition of his family, his health, and his happiness. He merely reaped what he sowed, or what he didn’t sow. Negligence of anything causes decay. John Kabat, Chief Quality Officer of East Coast Transportation, says this, “Processes, if not fully managed, will gravitate toward chaos.” Time management experts tell us the key to success in all areas is to maintain focus on all important aspects of life, such as social, spiritual, financial, educational, family, and health. The same principle can be applied to business as well.

Begin With the End in Mind With Your Business

Dr. Stephen Covey, author of The Seven Habits of Highly Effective People says, “We should begin with the end in mind.” In essence, we should determine what results we desire before we ever start. He goes on to say that without an effective plan our results may not be what we expect. Covey writes, “We may spend our entire lives climbing the ladder of success, and find out the ladder is leaning on the wrong wall.” Results, positive or negative, always begin with the leader’s vision or lack of it. Let’s look at the effective approach toward positive results.

Determine the results you and the other stakeholders want.

The stakeholders in our businesses are the people who are responsible for our success. They have a “stake” in the prosperity of our business. Your customers, employees, and vendors are examples of stakeholders. Other stakeholders may include your community, your church, and your family–anyone who may benefit from our organization. The effective leader determines what results are required from all of the stakeholders, and then finds ways to exceed their expectations. If you are determined enough and focus on getting the results you want, you will be able to achieve your goals.

Focus on Results for All Stakeholders

Once we have established the requirements of your stakeholders, we can develop a system that tracks results that are relevant to these requirements. Why consider the requirements of other stakeholders? The stakeholders are the people who will ensure our victory! Zig Ziglar, the renowned author, and public speaker says this about achievement, “You can get whatever you want in life as long as you help enough other people get what they want.” Without our stakeholder’s help, we will fail. With the help of other interested people, the sky’s the limit!

Focus on Results that YOU Want

Don’t forget what you want; you are the principal stakeholder! You, the leader must be so motivated to achieve your goals about your job that you “inspire” everyone else. So include everything that gets you excited: compensation, travel, vacation, personal growth, support of favorite causes, etc. Be sure to include non-financial requirements you may have of the business. Ideally, you are creating a purpose that transcends personal benefits; something that gives you and others a reason to live. Include the type of work you enjoy as well. For example, if you are creative, perhaps you would prefer to place yourself in a position that allows you to use your creativity.

Once a business owner has determined what he and the stakeholders want, the vision for the organization is established. Many large and growing companies write a vision statement. Every stakeholder in the company should know, understand, and work toward realizing this vision.

Know where you are.

Once we have established where our company is going, measures must be established to ensure we are on track. One thing is for sure, we must measure every important facet of our business. Dr. Janice Terrell, professor of business at the University of Central Florida makes the statement, “If you don’t measure it, you can’t manage it.” The scriptures admonish, “”The wise shepherd knows the condition of his flocks.” If a business owner makes the statement that customer satisfaction is important, but the owner doesn’t measure it, there is a disparity between the operator’s statement and the operator’s actions.

Establishing Measures for Your Key Business Drivers

Companies that are focused on quality establish Key Business Drivers and develop measures for these drivers. This helps keep an organization focused on stakeholder requirements. Some Key Business Drivers are financial in nature, such as Financial Performance, Revenue Growth, and Operational Performance. Other Key Business Drivers are non-financial in nature, such as Customer Satisfaction and Employee Satisfaction. You may have several measures for each Key Business Driver. For example, Employee Satisfaction might include a numerically scored employee survey, a measurement of employee turnover, the number of employee suggestions, etc.

Once measures are established, we can determine our present performance levels and begin to generate reports on a periodic basis (monthly, quarterly). Using our present performance as a baseline, we can set goals for future performance.

Track the results against your plan.

The biggest mistake we can make is to invest the time to develop a plan, and then ignore it! Many small business owners have been criticized for developing a written plan, putting the plan on their bookshelf, and the next time they look at it is next year when it’s time to develop the new plan! Once we determine the desired results, we must track our actual performance against the plan on a regular basis. Some businesses do this quarterly, some do this semi-annually, but leading companies do this monthly. The key is to do something to achieve your goals. I recently saw a poster that read, “You become successful the moment you start moving toward your goal.

The great thing about measuring results is that it causes us to ask questions about why things don’t work. It forces us to learn more about our businesses. Once we identify the obstacles to meeting our plan, we are well on the way to removing them.

Identify and remove obstacles to meeting your plan.

If we spend a great deal of time inside our own businesses, it is sometimes hard to understand why we’re not able to achieve our goals. My favorite professor in college was Professor Hall, an older gentleman with a British accent and an “in your face,” personality. He made the statement that “God gave us the amazing ability to identify the faults of others. However, we are completely unable to see our own faults.” This statement was made about individuals, but the same principles apply to businesses.

Bring in a Business Coach or Consultant

The way world-class companies handle this problem is by bringing in consultants. Charles Tenney, a consultant for the limousine industry says, “What we bring to the table is the perspective of being outside. We travel to operators all over the country and identify effective practices. We help our clients to know what works well, and what doesn’t.” Sometimes an outside perspective is just what a business needs to find a solution to a problem.

Perform Benchmarking for Areas that Need Improvement

Another effective method for improving results is using a process called “benchmarking.” People involved in quality circles call this “shameless stealing of great ideas.” You simply go to another organization to learn their effective practices, and you take the “best practices” back to your own company. This process is one of the most effective ways to improve your organization. The 20 Group concept, a practice that has existed in the automobile industry for many years, is a good example of benchmarking. Non-competing dealership owners meet each quarter to share information about effective practices.

Another way to benchmark is to simply identify an area in your business that needs improvement, find another business that is effective with that area of their own business, and get permission to visit them to learn. Most companies involved with quality improvement will be glad to show you their best practices.

Conclusion

The last thing to keep in mind is that success rarely comes quickly, and rarely comes without plain hard work. I have a screensaver on my computer that says “The race is not always to the swift, but to those who keep on running.” Continual steps toward our goal, even if the steps are very small, are many times the ones that move us to our destination.

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How Tough Times Added Dollars to the Bottom Line

Business Coach

Challenging times have caused most business owners to “tighten their belts.” These difficulties have caused many owners to open their minds to the idea of working with a business coach. As a result of getting help, the owners that we are working with are experiencing more money in their pockets and growing sales.

Business Owners Overcoming Obstacles

In recent weeks it has been exciting to see business owners overcome obstacles and get clarity on their business calling. It has been fun to engage their employees in pursuing the business vision in a way that benefits everyone involved and the community as well! Most of all it has been rewarding to help them discover immediate results that put money in their pocket.

Business Owner Results

Consider some of the following results:

More Business Owners Using Business Coaches

Many business owners are now searching for a business coach who can assist them in expanding their operations. We have experienced a significant increase in coaching projects. The difficult economic challenges are motivating business owners to find every advantage to increase their market share and to add dollars to their bottom line. We are recently working with service companies, small manufacturers, and professional firms.

Results for a Service Company Owner

John*, a service company owner said, “I came to the realization that I love to fix problems, but I’m not a very good manager of this business. We have been just barely getting by for years, even when economic times were good. Now I realize that we have left a huge amount of money on the table.” In the first session with John and his team we added $75,000, which is pretty good considering John has been making $40,000 per year for the last ten years!

Conclusion

We find time after time that business owners are burned out. They have “foggy thinking.” They are working too much. They are too stressed out. They are on a treadmill, and they don’t know how to get off. Then many come to us to sell their company at the worst possible time. We are bringing on average approximately 2500% return on investment for our clients. For every $1.00 spent with us, we bring $25.00 in return.

Are you ready to take advantage of difficult times? If so, give us a call.

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Exit Strategy: Being in a Position of Strength

Exit Strategy

If you have done a good job of building a successful business, one day you should be able to sell it for a considerable sum of money. You have developed considerable “sweat equity” by working hard for your income.

It is wise to develop an “exit strategy” well in advance of your time to sell your business.  Actually, you should have an exit strategy on the first day you are in business. Private Equity Groups will not make an investment in a business until they know how they are going to exit the business.

Your Business is a “401k Plan”

Since the majority of your wealth is invested in your business, you should begin to think about your business as a “401K” plan. No matter how long you have been in business, an exit strategy is an essential part of ensuring that your long-term financial interests stay in place. This will be true even though a number of scenarios could require you to adjust the date and manner in which you exit your business.

Keep Yourself and Your Business in a Position of Strength

You want to prepare for the right reasons, the right timing and the appropriate manner in which you depart your business in the future. Keep yourself in a position of strength. Your goal is to depart your business on your terms, not the terms of someone else! Consider the following two issues:

1. You should know the value of your business.

You should know how much you want to sell your business for in the future. Your exit strategy should be anchored by what can realistically be accomplished through a business sale at a later date. We recommend that business owners get an annual evaluation of their business. In the same way that a 401k plan investor gets an annual statement with the account balance, you should know the value of your hard work, and you should focus on building that value. Knowing this value may transform how you run your business and how you approach risks. Too many business owners subject their long term financial interests to unnecessary risks because they do not clearly understand the likely future return on investment.

2. Make sure you have an exit strategy that anticipates the unexpected.

There is a strong likelihood that the timetable you have in mind for a future business sale may not come to pass right on schedule. It will likely happen sooner or later than your plan. The time spent preparing for “worst-case scenarios” will position you to save time, money, and legal problems. This time investment will help you to avoid stress, heartburn, the loss of your “401k” retirement plan. Below are some scenarios that could cause a major course correction.

Your Business Exit Strategy Should Consider Potential Scenarios

Do you have an exit strategy that addresses these potential scenarios?

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•    You become burned out, go through a divorce, or a health crisis.

•    You want something more challenging, more fun or less stressful.
•    You run short on working capital.
•    Your business needs new skills, a new approach or resources you can’t provide.
•    Your partner wants out of the business, dies or becomes disabled.
•    Your partner gets divorced and needs cash for a settlement.

The fact is that very few business people want to spend time considering these negative situations, but the reality is that these things can happen, and you want to protect your retirement plan. Wise business owners make the time to address these issues.

Conclusion

A wise saying is that “you shall know the Truth, and the Truth shall set you free.”  Spending the time now working on your business exit will help you plan for the unforeseen, and will allow you to build and protect your largest investment and asset; your “Business 401k plan.”

Questions about our small business coaching services?

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