Without positive cash flow I can promise you that running your business just won’t be much fun. Watch this video to get some ideas about what you can do to make sure you never run out of cash.
After you watch this video, why don’t you let me know what you think in the comments below.
If you don’t have it, you can’t sleep, you can’t answer the phone, you spend all of your time wondering where you’re going to get some and how you’re going to keep the wolf from your door.
If this sounds like you, you’re not alone. It happened to me and unfortunately it happened more than once. The lack of cash is what caused me to come up with one of my more obvious sayings, Happiness is positive cash flow.
Hi, I’m Josh Patrick and I want to take a few minutes of your time to talk about the terrible problem of running out of cash.
You can’t ever stop marketing and selling.
The number one mistake I see private business owners like you make is you sell, sell, sell and then get really busy servicing the customers you’ve sold products to. Then, you stop selling because you have all this business you need to service.
You don’t want to be one of those people. Instead, you need to always be marketing and selling. The reason is pretty simple……the customers you got will eventually all be serviced and you won’t have any cash coming in because you stopped selling.
Here’s what I want you to do. I want you to say you’re full at 75% of capacity. This way you’ll always have time to sell and keep away from the hills and valleys of negative cash flow.
Next, make sure you have a dashboard that tells you the truth.
Making sure you have cash means you need to know when problems are about to occur. I don’t mean problems that are going to happen tomorrow. I mean problems that will come up 30, 60 or even 90 days from now.
You’ll have this information when you develop a dashboard that tells you what’s going to happen in the future. You need to answer questions like what is your backlog, how many customers do you have in your pipeline, what major expenses do you have and are you on or off budget?
The better your information is the better chance you’ll know that you’re about to have a cash crunch. The further out that information goes, the better chance you’ll have to do something about it.
Having a great dashboard helped from going bankrupt more than once. It’s something you really need to develop.
Next, be proactive – if you have a problem, tell your vendors.
When cash gets tight, your tendency is to avoid the truth and avoid calls from vendors. This is the worst thing you can do.
I’ve found that when I tell my banker and vendors when I’m having a cash problem, they’re often helpful. This is especially true when I come up with a realistic plan for how I’m going to get my company back on track and it’s something you’ll absolutely need to do if you find yourself in this position.
This is what I want you to do. I want you to make sure that you tell your vendors when cash is tight or you have to delay or renegotiate payments. I know this sounds counter-intuitive and at the same time it’s the only thing that will work and it might even help you sleep better.
Do you know where your profits and cash come from?
This means you have to understand who your best customers are and why they’re your best customers. I’ve had too many business owners tell me their best customers are the ones who create the most top line revenue. Too often this is a wrong answer.
Just because a customer is big and creates lots of top line cash, it doesn’t mean they also make you money. Sometimes that really big customer is the one that you’ve cut a great deal with, a deal that’s 125% in their favor.
I want you to stop doing this and make sure you understand where your profits come from, not who the customer is that pays you the most money.
Finally, you need to know the difference between profits and cash
This is a big one. Profits and free cash are not the same thing. This was the mistake I made that almost put me out of business.
If you have bank loans to pay, are buying capital equipment, increasing your inventory or holding more receivables they all eat cash.
You probably already know that. You might not know that they not only eat cash, but they don’t show up as expenses on your profit and loss statement.
That’s why I believe the most important part of your accounting package is your cash flow statement. This is the only section in your accounting reports that tells you what happened to your cash.
The truth is your business runs on cash and not profits. If you don’t understand the difference, there’s a good chance a nasty surprise is in your future.
Don’t let running out of cash be one of your problems. Pay attention to the five areas we talked about and your chances of not experiencing a nasty surprise will get better.
So, what do you think? Are you willing to make sure you take steps to have positive cash flow? If so, why don’t you tell me about it in the comments below?
And, oh yea, I have a free special report for you. It’s called simplified business budgeting. It’ll make your budgeting a lot easier and you might even use it in your business. Just click the button below and we’ll get it on it’s way to you.
Again, I’m Josh Patrick. Thanks so much for stopping by. If you’re interested in having a conversation with me about cash flow, why don’t you click on the link at the end of this video? You’ll be to choose a date and time for us to talk.
Thanks so much and I hope to see you back here really soon.