You Can Creatively Manage Your Cash Flow 7 Ways



If you’re taking the pulse of your business, of course, the first thing to consider is your cash flow. If your cash flow is poor, you feel poor because you can’t pay the bills nor can you use money for what you’d like to do.

Your image can also suffer with vendors or with customers, if you don’t manage your cash flow.

Creativity, planning and communication are all vital in cash flow considerations.

ID-100258930 jscreationzsHere’s how to avoid the cash-flow roller-coaster ride:

1. Prioritize your bills

Priority A — So you can best operate your company without business interruption, there are certain bills to be paid first. They include payroll, rent, taxes, or tardy utility bills.

Priority B — Some bills have grace periods, so pay them after gauging their importance. Some come with small penalties which you might more easily absorb. Such bills are important bills but you might be able to delay payment on insurance and utility bills.

Priority C — Even if you’re a tad slow, some vendors will work with you, if you communicate with them and make regular payments.

2. Pay with deliberation

For time management, it’s permissible to write your checks at the same time. But disburse your checks according to your priorities. This is to avoid bounced checks and over-draft fees.

Label each bill with the payment date. You should also develop a master list of your bills with payment dates.

3. Assess your financials

As the old adage goes: “A sale ain’t a sale until the money’s in the till.”

Don’t pay on the sales you hope to make. Pay on revenue that has actually arrived.

Who is more important than a quality credit provider? Treat the relationship like a business marriage.

4. Don’t operate your company with sales taxes

Maintain separate a separate account for sales taxes. Don’t even think about using sales taxes as working capital to operate your business.

You’ll suffer greatly from stress, fees, interest, and penalties.

5. If you have employees, consider a payroll service

You’ll save valuable time to operate and market your business, if you hire a professional service for the collection and payment of payroll taxes.

6. Evaluate options for your payroll schedule

Not all revenue streams are alike. Some sectors have a high frequency of deposits from daily sales. Others don’t. Restaurants differ from some wholesale suppliers. Learn what’s possible in your locale.

If you have a slow revenue stream, you don’t want to issue payroll as frequently as other businesses. A slow payroll schedule also delays payroll tax deposits.

7. Develop and maintain a strong relationship with your banker

Who is more important than a quality credit provider? Treat the relationship like a business marriage.

It’s also important to have a good working relationship with your bank, even if you’re not granted a line of credit or loan.

Should you unfortunately bounce checks, a local branch manager usually has the authority to waive fees or to honor checks.

From the Coach’s Corner, more cash flow tips:

For the Best Cash Flow, Manage Your Inventory Costs with 8 Tips — With proper inventory management, you can lower your expenses and increase your cash flow. For many businesses, that means taking a look at your inventory costs. When your products aren’t selling, obviously, it hurts. Products just lurking and collecting dust in your warehouse are costing you money.

Angel Investor: Tips for Increasing Cash Flow, Profits — A successful angel investor shares his tips for good cash flow and other profit issues.

Don’t let Minimum Wage Mandates Ruin Your Business — Your cash flow, credit access, pricing and profit margins are all directly or indirectly at-risk with the proposed mandates to increase the minimum wage. Workers should be paid well, if they’re good performers.

Partnerships — 7 Steps to Avoid Fights over Money — When a business has cash flow issues, a key issue that comes up every day is money. As a partnership, you have a shared responsibility to discuss issues on principles without arguing in an ad hominem manner. Your company is doomed if you ever attack your partner’s character or sarcastically belittle the person’s traits.

For Profits, Manage Your Growth at the Right Pace — Entrepreneurs frequently try to rush their business growth. Certainly, growth is great but if you scale too fast, you’re looking for trouble. The key is to prepare.

“Number one, cash is king… number two, communicate… number three, buy or bury the competition.”

-Jack Welch


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Image courtesy of jscreationzs at www.freedigitalphotos.net

4 Strategies if You Fear Missing Year-End Forecasts

How to strategically manage a financial crisis



Are you sweating over cash flow? Are you losing sleep over the prospect of missing your annual goals?

Well, if so, certainly you’re not alone. Many business owners and executives have suffered from the same anxiety.

But fear can be a great motivator for success.

ID-100217182 ChaiwatThe first four things to do:

1. Even though you’re facing the big problem now, don’t throw the baby out with the bath water

A characteristic of successful businesspeople – they don’t panic in the face of adversity. They see problems as opportunities for growth.

Take some deep breaths and repeat these truths: – “No matter what, there are no big deals – no matter what.” – “This, too, shall pass.”

Next, here’s an important point: To improve your profits, don’t impulsively take short-term actions that will destroy your foundation for the long term.

Many businesspeople make critical mistakes when they suddenly slash marketing budgets, lay off talented workers or cut research and development.

These expenses might appear to be expendable, but don’t do it in a rash manner. They are all intangible assets. Slashing them will diminish your long-term prospects. Learn how to work smarter, not harder.

2. Focus on short-term profit initiatives. Consider that for every problem, there are 10 possible solutions. To use a sports metaphor, defend your business with a strong offense.

Query your customers and their customers to search for sales opportunities. Launch an all-out marketing offensive in public relations and social media. (If you can, a secret to success in a weak economy is to expand marketing.)

Hoard your cash. Cut all fat (not the muscle of marketing, human resources and R&D). Implement shorter work weeks and cut all temp assignments.

Do these things and you’ll get into a positive mental zone, and you’ll suddenly find that you’re developing additional solutions.

A characteristic of successful businesspeople – they don’t panic in the face of adversity. They see problems as opportunities for growth.

3. Continue to analyze and strategize – prevent mistakes. Many companies don’t have a clear picture of their situations. They complacently assume that they do, but most don’t.

Consequently, nine out of 10 fail because they self destruct – not because they’re defeated by competitors. This is true in any sector.

Early-stage companies fail because they try to grow at a pace inconsistent with their capabilities. The term for it is “premature scaling.” Don’t accelerate unproven ideas unless you’ve done enough homework.

Otherwise, you’ll inadvertently make matters worse. For more explanation on premature scaling, see the reasons why startup companies fail and how to win.

4. Figure out how you can operate leaner by engaging your employees. On a daily basis, your employees are where the tire meets the road. For profit drivers, partner with your employees

Use the proven strategies when sales drop and costs cut into your profits. Use free tools to operate and market your business.

From the Coach’s Corner, here are related resources:

Step-by-Step Solutions for a Company Turnaround — Difficult economic conditions have exacerbated the woes facing many businesses. But business success is possible for companies suffering through red ink. Here are financial solutions that will help facilitate a company turnaround.

Why Kaizen Philosophy Works in Lean Principles for Business and Public Sector— Lean thinking has become imperative for business and government. Budgets are strained, but pressure continues to mount for better customer service. The bottom-line: Both the private and public sectors need to save time and money while providing exemplary service – with existing resources.

When Should You Develop an Exit Strategy? Now…Here’s How — You should always have an exit strategy in place – no matter what. Whether you’re just starting out or you’re a veteran business owner, you should always have an exit strategy.

Need PR, But No Budget? Here’s How to Leverage News Media — Social media is OK for promotion. But if you need blockbuster publicity, use best practices in marketing. Play a trump card — leverage the news media for public relations.

6 Tips to Create New Sales with Successful Cold Calling — For most businesspeople in a lackluster economy, it’s important to create new opportunities with successful cold calling. Yes, it’s necessary to concentrate more efforts to create new sales. Attending mere networking events or depending on a high marketing budget aren’t sufficient for strong sales. OK, cold calling isn’t always easy, but you must if you want to dramatically increase sales in double-digit percentages. Develop and implement the right strategies. You’ll be in the all-important groove for a happy buying environment.

“Behind every successful man is a woman, behind her is his wife.”

Groucho Marx

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Photo courtesy of Chaiwat www.freedigitalphotos.net

Small Business Options for Year-End Cash Flow, Tax Benefits



The fourth quarter is the time for small business owners to reflect on options for year-end cash flow and tax benefits.

In general, here are items to discuss with your accountant and tax advisor:

Anticipate tax obligations. Your first concern should be to reduce your tax obligation next April. Unless you already know you have too many write offs, you can further accomplish it with legal strategies to delay income and accelerate your expenses.

ID-10042601 worradmuExpenses. Decide what equipment, furniture and supplies you can buy this month.

Delay invoicing. Unless you have cash flow issues, and if your calendar year is your fiscal year and you run your business on a cash basis, delay mailing your invoices.

Retirement account. If you don’t have a retirement account, establish a qualified plan. It’s important for diversity in a downturn or when times are good. This will help your tax picture, as well.

IT updates. If you’re considering updating your bookkeeping and technology systems, do it before the end of the year. In this way, you’ll make it easier to start fresh for the New Year. You’ll want to segregate your old records from the new.

Weigh the possible benefits for acquiring new equipment. You’ll need to make a financial forecast.

Financing options. As for financing any new equipment purchases, do your due diligence. Determine your best options for financing, as well as for your tax situation.

Section 179. Understand how the IRS will view your situation in terms of Section 179 depreciation deductions and bonus depreciation. Section 179 deductions for certain expenses are allowable up to $500,000.

Credit options. In addition to understanding the pros and cons of possible tax incentives, know your credit situation. For the best credit worthy businesses, lease financing might be a viable option. But it’s getting more complicated with financial institutions than in past years.

Buying due diligence. If you do buy or lease, it also goes without saying to comparison shop all fees, rates, and terms. Avoid paying so-called application fees. Also be careful with the hidden evergreen clauses.

Should you decide to buy from different vendors, consider grouping all the purchases into one package, which means you’ll benefit from lower fees and rates.

Consider these options small business options for year-end cash flow and tax benefits. But remember this is not tax advice for your situation. Again, see your accountant and tax advisor for counsel as part of your decision-making.

From the Coach’s Corner, related content:

Finance – Managing Hidden Evergreen Clauses for Your Benefit — A big frustration for businesspeople in financing and leasing business and commercial equipment comes after they fail to read the fine print in contracts. Commonly found in financing and leasing contracts, evergreen clauses are designed to keep customers committed to an agreement beyond the original term. To the rescue: LeaseQ, www.leaseq.com.

Budgeting Basics for a Micro Business — For entrepreneurs, often the most difficult part of launching a business is preparing financial projections. It may not be the most enjoyable task, but budgeting is imperative for maximizing performance. “Eight out of 10 companies fail in the first two years due to insufficient cash,” warns esteemed financial consultant Roni Fischer.

12 Tips for Profits to Keep Your Business Dreams Alive — Most businesspeople agree the economy continues to be challenging. Signs of a lingering downturn are everywhere. Business activity is slow. Governments at all levels report low tax revenue and are restructuring, and not spending. So what can you do?

Accounting / Finance – Why and How to Determine Your Break-Even Point — Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools. One important tool – know your break-even point (BEP). A BEP analysis should be an integral part of your financial planning. If it isn’t, you can count on suffering from unnecessary stress – emotionally and financially.

Cutting Costs — 9 Best Practices to Avoid Making Reactionary Decisions — In chaotic times, it’s common for businesspeople to be fearful and reactionary when they feel they must cut expenses. But entrepreneurs need to be unemotional so that they make decisions that will bolster their objectives. They can take the emotion out of their decision-making — by eliminating stress factors — if their priorities are clearly defined with values. This is facilitated by documenting goals and priorities.

“If you make any money, the government shoves you in the creek once a year with it in your pockets, and all that don’t get wet you can keep.”

-Will Rogers

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Photo courtesy of worradmu at www.freedigitalphotos.net

Budget Planning Tips for New Entrepreneurs



For entrepreneurs, often the most difficult part of launching a business is preparing financial projections.

It may not be the most enjoyable task, but budgeting is imperative for maximizing performance.

“Eight out of 10 companies fail in the first two years due to insufficient cash,” warns esteemed financial consultant Roni Fischer.

In addition, you’ll need to be on top of your financials in order to grow – whether you hope to obtain a bank loan, attract investors, invest in equipment, or hire employees.

“Companies need to develop both an annual operating budget and a cash plan,” says Ms. Fischer.

“The annual operating budget provides a roadmap for your operations for the next 12 months – including your projected sales to customers, your associated costs to produce these items, your marketing and customer services costs, as well as your overhead expenses,” she explains. “The difference between the revenue (sales to customers) and the costs is your projected income (or loss) for the year.

“Along with the annual operating budget, you’ll want to project your cash flow,” adds Ms. Fischer. “For early stage and emerging companies, cash flow is difficult to sustain as growth always requires cash. Therefore, it is imperative to know when you will be collecting receipts from your customers and when your bills need to be paid to ensure you have adequate cash to honor your payroll and vendor payment commitments.”

Ms. Fischer is president of RLF Associates, Inc. in the Los Angeles area. I’m very familiar with her work. As a leading consultant for over 25 years, she provides expert financial and management solutions for firms ranging from start-up companies to multi-hundred million dollar corporations.

“Eight out of 10 companies fail in the first two years due to insufficient cash.”

Ms. Fischer offers the following guidance for preparing your monthly projections:

Key Elements for an Annual Operating Budget:

  1. Prior Performance. If you have data from the prior year(s), this can be helpful in preparing your current year budget. 
  2. Sales Projections. Be pragmatic about your forecast. Include how much you plan to sell and at what price. Anticipate the elasticity of customer demand vis-à-vis economic conditions and price points. 
  3. Cost of Goods Sold. This includes materials and labor (your “direct” costs for producing the items), and your ”indirect” costs for manufacturing. 
  4. Expenses. Include your sales and marketing expenses as well as your overhead costs – such as salaries, rent, utilities and supplies. 
  5. Operating Income. Calculate sales, less cost of goods sold, less expenses to determine your operating income (or loss). 
  6. Assumptions. Ensure that your assumptions are reasonable and achievable. Base your projections on your experience, instincts, market research and other available information.

Key Elements for a Cash Plan:

  1. Beginning Cash Balance. Start with the cash you currently have in the bank. 
  2. Cash Receipts. Estimate the cash you anticipate receiving from your customers; considering the payment terms you have offered to them. Keep in mind that although you may have “sales” in December, you may not collect the cash until January or February (or later). 
  3. Cash Disbursements. Project the cash you will need to pay your expenses in a timely fashion. Consider every expense from payroll (and associated payroll taxes) to rent to other operating costs. 
  4. Cash Surplus or Shortfall. Starting with your beginning cash balance, add your cash receipts, and subtract your cash disbursements. If the result is a “positive” number, you have a surplus. If the result is a “negative” number (less than zero), you have a shortfall, and will need to review your annual operating budget to determine which expenses you can reduce, which payments you can defer, or where you can obtain a loan to cover this shortfall. 
  5. Financing. Determine if you have the required funds for the period in question. Hopefully, you will have a surplus. If not, consider other sources for obtaining money such as a bank line of credit, factoring your accounts receivable or obtaining a loan from friends or family members. Make sure you maintain a cash reserve for contingencies. 
  6. Ending Cash Balance. Calculate your ending cash balance by starting with your beginning cash balance, adding your cash receipts and any financing, and subtracting your cash disbursements. The resulting amount will be the beginning cash balance for the next period.

You’ve no doubt heard the adage, “Cash is king.” So make certain you have ample reserves to operate your business.

(Note: Ms. Fischer is premier financial consultant, and a fellow member of Consultants West, www.consultantswest.com, a roundtable of veteran consultants in the Los Angeles area.)

From the Coach’s Corner, here are some related resource links:

Primer for Best Practices in Preparing Financial Statements — A good financial system is vital for your business. Not only will a properly prepared financial statement tell you what’s transpired in your business, it will give you a snapshot regarding your future.  Measurement of cash flow is paramount.

Accounting / Finance – Why and How to Determine Your Break-Even Point — Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools. One important tool – know your break-even point (BEP).

Do You Know What Drives Your Profit? (There Are 4 Drivers) — For profits, entrepreneurs must learn how to manage their financials and performance, which are difficult tasks. Savvy business owners know who their ideal clients or customers are. Entrepreneurs realize financial benefits when their revenue from business exceeds their expenses and taxes. This results in a much easier task – deciding whether to save, spend or invest the profit back into the business. So, it’s imperative to know what drives profit.

Embezzlement – 21 Tips to Protect Your Nonprofit or Company Assets — Embezzlement is a widespread nightmare in business and the public sector. If you surf the Internet using the key word, embezzlement, you’ll find seemingly countless headlines.

6 Values for Financial Protection — Part two of two-part series: “Solutions for a Roller Coaster Marketplace”   Debt is the catalyst for all financial woes – for individuals and the aggregate economy in the United States and globally, esteemed associate Joey Tamer astutely reminds us.

11 Tips to Win Your Entrepreneurial (Marathon) Race — For successful small firms, strong cash flow doesn’t just happen. Advertising firms to tech startups have a system. They plan and implement with precision. Using these strategies, you, too, will safely walk the tightrope to stay above water.

“If you aren’t practicing and playing to be first, then maybe you shouldn’t be an entrepreneur.”

Robert Kiyosaki


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy nenetus at www.freedigitalphotos.net

11 Tips to Win Your Entrepreneurial (Marathon) Race



If you fear losing your entrepreneurial race, there are right steps to take and there are wrong. The good news is not all small businesspeople have cash flow issues. They’ve run the race and survived the marathon.

So you’re not alone. You can also be confident in knowing that as a small businessperson, you’re an important part of the nation’s economy.

The Small Business Administration’s Web site provides some salient data about the accomplishments of small business:

– They comprise 99.7 percent of all employers

-Employ more than 50 percent of all workers and account for 44 percent of the private-sector payroll

– Hired 40 percent of all high-tech employees

– 52 percent are home-based, 2 percent are franchisees

– Responsible for more than 50 percent of the nation’s nonfarm private gross domestic product

– 97.3 percent of all exporters

So congratulate yourself for your efforts.

ID-10094542 Sura NualpradidRemember, for survivors, strong cash flow doesn’t just happen. They’ve got a system.

Here are 11 tips to win your entrepreneurial race:

1. Start by writing a gratitude list.

Digest and relish what’s working in your career and life. Beleaguered business owners spend too much time worrying about what’s not working.

This includes little things like consistently saying thank you to your customers, vendors and employees.

Forget the hackneyed phrase, “Have a nice day.” Ugh. Just say thank you instead. An attitude of gratitude will help brighten each day and will make you more receptive to new ideas.

2. Chances are you’re feeling disorganized.

Write a to-do list of day-to-day priorities. Focus on just one thing at a time. Scratch each accomplishment off the list.

3. Feeling burned out is also a common symptom.

Start an affirmation list of your qualities – personal and business. Daily review it and remind yourself of your qualities. No item is too small to list.

4. In cash flow, practice the two Ms – monitor and manage.

Take inventory of your situation. Assess where you are by performing a break-even analysis. Predict spending and what trivial expenses can be cut.

Make sure, though, you don’t cut muscle – marketing and human resources. Treat your employees as human capital. And make sales and marketing an important part of every day.

5. Understand how your business should profitably function.

That’s with business processes, and what is truly necessary for your survival. That, of course, includes key performance indicators (KPI), setting goals and measuring results. KPIs will range from products to customer satisfaction.

6. Be a good listener, but be vocal.

Develop strategic partners to save costs and to promote your business. Be seen as a team player. Promote your industry. By building up your profession, you will help yourself. Become the go-to person in the eyes of the community and news media. Besides, it’s true that rising tides raise all boats.

Do something positive when your public officials compensate for revenue decreases by creatively increasing fees and taxes, which hurt the economic climate. With like-minded businesspeople, speak out. By brightening your small-business economic environment, cash flow will turn green for everyone, including you. Picture yourself not being uptight about money – there’s enough to go around. Just look out for your industry and company.

7. When feasible, use the three Rs – recycle, reuse and reduce.

Unlike a large business, you don’t have big cash reserves and customer base. Leverage all the possible money-saving tools in your business and personal life.

8. Stay focused.

Fine-tune as you go, but in general, stick with your roadmap. Don’t panic and steer off course. There are no magical miracles or detours. If you’ve done your strategic planning, don’t engage in worry or self-doubt. Just do the planned footwork.

9. Look for opportunities to multiply your sources of revenue.

That includes buying out competitors, especially, if you get a favorable price, terms, and valuable talent. Check with your CPA to see if a leveraged buyout is workable. You’ll save cash flow.

10. Take advantage of technology.

Staying current on technology will help you save time and money while increasing revenue. The more mobile you are, the more competitive you’ll become.

11. Look around to help someone less fortunate than you.

It will help you keep a smile on your face. Customers, vendors and employees will love it.

Use these basics, and you, too, will your entrepreneurial (marathon) race.

From the Coach’s Corner, here’s more on entrepreneurship.

Checklist – 10 Legal Basics for New Entrepreneurs — Thinking about legal matters can be tedious when you have a lot of details on your plate. But laws and regulations are important when establishing and operating your company. Every region has different laws and regulations — here are some of the fundamentals.

Best Practices for New Women Entrepreneurs to Stay Focused — The keys for business women are to plan well, create the right balance, persevere and have the right support system. It isn’t commonly known, but women entrepreneurs inherently have stronger skills than men in key areas. Women are more organized than men in financial and other administrative matters, says a longtime business associate in Washington.

Eye-Opening Options to Generate Soaring Profits — A small-business owner asks for relief from her financial roller coaster – here are four often-overlooked ways to boost profits.

I don’t like money actually, but it quiets the nerves.”

-Joe E. Lewis


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Image courtesy of Sura Nualpradid www.freedigitalphotos.net

Angel Investor: Tips for Increasing Cash Flow, Profits



For a growing business, cash flow is crucial for profitability. That’s also true for the biggest companies and sectors traded on Wall Street – airlines, cars, financial services, oil or technology.

Every company is always concerned about cash flow.

During the Great Recession in 2008, an astounding 128 of the Fortune 500 companies in the nation had red ink. They included General Motors, Citigroup, Motorola, AIG, Merrill Lynch, ConocoPhillips, and Time Warner.

ipad-407799_1280Cash flow enables you to make productive decisions to navigate and grow in the competitive marketplace.

No one knows that better than angel investor John B. Dimmer.

Mr. Dimmer is the managing member in FIRS Management LLC, a private investment firm based in Tacoma, WA.

He is also a director at three companies and has extensive management experience.

Here is a sample of his cash-flow solutions:

Q: How do you recommend predicting a cash-flow crunch in time to do something about it?

A: You need monthly income and expense forecasts that are established at the beginning of the business year. These must be realistic numbers that all of the management staff has agreed are reasonable. The second things you need are timely and accurate financial statements.

It is very much like planning a road trip in the car. You are trying to get from point A to point B, so you plot a route. You know that there are landmarks along the way. Every now and then you need to stop and check for these landmarks. If they show up where you expect them, you know you are on the right track. If not, you need to evaluate how far off course you are, and take corrective action.

Q: What strategic process do you recommend to evaluate the causes of cash deficits? What are the most promising solutions?

A: Getting back to our roadmap analogy, if you don’t see a landmark that should be there, or you find a new landmark that wasn’t on the original plan, you need a process for getting back on track. You need to take the time to evaluate where you are, where you should be, and what went wrong.

When you are off plan, there are some fundamental questions that need to be asked: Was the original plan flawed? Has there been a fundamental shift in the business such that the original plan is no longer applicable? Did we make an execution error? When, where, and what was it? Can it be corrected? What are the critical variables with respect to getting back on plan?

Usually this involves one primary variable, which is money. Whatever solution you take, you need to make sure you have enough money to fund it through implementation.

One of the mistakes I often see are entrepreneurs who staff their organizations under the assumption of optimum activity.

Q: How do you recommend finding creative ways to keep the business alive until sales pick up?

A: One of the mistakes I often see are entrepreneurs who staff their organizations under the assumption of optimum activity. The truth is that there are cycles to business. While not all business can use contract help, I like to try and have my companies staffed to a smoothed-average that is just above the troughs and just below the peaks. In this fashion, you can quickly and effectively reduce your labor costs in times of a slowdown without causing a morale-crisis with your permanent employees. I would also use slower times to beef up on training in preparation for when the good times return.

Finally, encourage your staff to make things happen. When we hit a slowdown in the car business, we ask our sales staff to get on the phone and start calling people. This usually starts with former customers and takes the form of a friendly call simply to inquire how everything is going with their car. Often times, you discover that they love their car, and they have a friend who is interested in buying a new car. Sometimes you find that they love their car and they want to buy another. And sometimes you find that there is a problem. Problems, however, create opportunities. If you invite them to come in, and then solve their problem, they will remember that you were proactive. They will tell their friends about their experience, and their friend will come and see you for their car needs.

Q: What about negotiating with investors or other financial supporters until cash flows increase?

A: Investors hate bad surprises, especially when the surprise is accompanied by an emergency need for funds. Assuming you created the roadmap, and are tracking your progress, you should be able to see the bump in the road well before you actually hit the bump. Most investors are business people who have been down the road before and know that everything is not smooth sailing. They will appreciate the fact that you have a plan, that you are tracking your results against the plan, and that you have foreseen a problem before it hits.

Generally cash flow problems mean you need to borrow more money or raise more equity. If such is the case, have your presentation for raising new money ready to go so that you can transition from the communication stage to the pitch. Be humble, because the last thing I really want to hear as an investor is how smart you are and how great everything is going when, in fact, you are off plan and running out of money.

Part of the negotiation is an acknowledgement of the problem, a rational analysis and a well-crafted solution. You, as the owner, may need to take a bit of a hit in order to implement a solution. This might come in the form of a down round of fundraising where you are force to make up the dilution to the other shareholders out of your own holdings. Know what you are and are not willing to do. If you are forced to give up something to keep the company alive, figure out how to get it back, perhaps via options, if your revised plan was the proper call and the company comes roaring back.

Q: How do you know when it’s time to close or sell the business?

A: I always want to stay in the game, even when it is two outs in the bottom of the ninth inning, you are down by five runs, and the count is full, there is still a chance you can pull off a win. Nonetheless, I try to keep entrepreneurs from getting in so deep that if their company fails, they are wiped out.  I’ve been involved with two companies where I had to tell the entrepreneur that they shouldn’t put any more money into the operation.

In one of those instances, we were able to locate a buyer for the company. The purchaser was a publicly traded entity that, since the purchase, has taken a bit of a down-turn, so the jury is still out as to whether the entrepreneur will come out whole. Nonetheless, it was a better option than closing the doors. With the other company, we have what we feel is great technology; we just can’t seem to get a revenue stream developed. We are in the process of procuring a patent, and think that it will have good commercial value once the patent is issued. Accordingly, we have put the operational aspect of the company in suspense, and are pursuing acquisition opportunities.  The biggest risk on this strategy is a failure to cut a deal followed by an impotent patent.

I never advocate simply closing the doors. If you are doing proper planning, you should see the problem coming down the road. There should always be something saleable about your company, even if it is less than a full recovery.

From the Coach’s Corner, more from Mr. Dimmer:

“I buy expensive suits. They just look cheap on me.”

-Warren Buffett 


 
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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Seattle business consultant Terry Corbell provides high-performance management services and strategies.