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Home » Operations

How to grow your business (part 3)

Cash is King

This is the 3rd post in our  10 part series. You can catch up with the other articles  here . In this series of posts we are looking at how your business can be prepared when the economy starts to turn around.

In this post we look at cash and how to keep hold of it.

Most businesses fail not by failing to make a profit, but by running out of cash.

Never has this been more true than  in the last couple of years when banks have not extended overdrafts or granted business loans. So never has the time been right to look within your business to see what opportunities exist to generate cash – start by looking at:

Who owes you money?

Make a list of who owes you money and rank that by how long the money has been outstanding over due date. At the top of the list should be the oldest debt.

Start calling them and ask for payment.

Be cautious of accepting new work until they have paid off outstanding debts.

Stock

How much stock are you holding over and above that required to meet in hand orders?

Will your stock last longer than the time it takes to get new supplies based on average sales?

Do you need to hold a sale?

Who do you owe?

Who do you owe money too?

Can you delay payment or renegotiate payment terms?

Look at your cost base

Are there any costs that don’t directly add value to the business.

Communicate

Tell your workers or team what’s going on and why and ask them for ideas.

Seize Opportunities

As the economy starts to turn, some businesses will run out of cash and go to the wall. Having cash will enable you to buy stock or equipment cheaply, or even their business,  which in turn will grow your business.

So, what do you think?

3 Comments »

  • Joshua Black | The Underdog Millionaire said:

    Cash is totally king, especially with a small business. The bootsrappers that are able to fund their businesses totally themselves with no help from a bank are much more nimble and free to operate than the ones that owe somebody a bag of money.

    When you have a loan, it’s almost the same as being publically traded. There are other people pulling the strings in your business instead of you calling all the shots.

    Boostrappers of the world unite!

    -Joshua Black
    The Underdog Millionaire
    .-= Joshua Black | The Underdog Millionaire´s last blog ..Feel Like You’re Putting Out and Oil Fire When Operating Your Small Business? =-.

  • Matthew Needham said:

    Hey Joshua, thanks for the comment! I think far more people are cautious of borrowing money nowadays from banks, so businesses are going to be have to be far more reliant on managing their cash.

  • Steve Scott Site said:

    Running out of cash is a fear that many small businesses are having these days. Trying to stick to your budget is crucial in times like these. Be sure to keep track of your finances, and plan for emergencies that may pop up instead of wasting any excess cash on supplies that aren’t 100% necessary. It may save you later down the line.