Most businesses actually make a loss – but survive, thanks to positive cash flow.
But lack of cash flow is the cranky hound that will bite you on the bum, and ultimately propel you towards bankruptcy!
A good cash flow will also buy you the time you need in order to become profitable. It gives you the staying power necessary to invent, reinvent, trial and test, until finally, you finish up with a winning system.
In fact, often it’s just one new product, a different media, a new ad, one marketing and sales breakthrough that can take the company from the brink of destruction, to the pinnacle of outrageous success! And in reality, success is the logical result of a procession of tests, failures, successes, tweaks, adjustments, investments, and decisions, followed up with action!
Throughout the years I have been in business, I have developed many methods for increasing cash flow. I refer to them as cash flow accelerators C.F.A.’s. Here’s the first of many I will share with you in the coming weeks.
1.) Reduce and control expenses and wastage.
Most businesses accumulate ‘fat’ and wastage; such running expenses as wages, product costs, excessive telephone bills, over supply and increased expense of office stationery and freight costs. All sorts of expenses creep up!
The best way to stay on top of this is divide your expenses into categories, which then become a dollar percentage, in relation to gross sales.
It’s been a while since I was in the food game, but the key categories in that industry was food costs, wages and rent. For example I aimed for wages to be 16% to 22% of turnover. A good result would be closer to 16%, and at 22% the staff level is too high as a percentage of turnover.
In your own business, start by determining just what the key categories peculiar to your industry are, then find out what percentage of turnover they should be. Enlist the help of trade associations, your accountant, and draw upon your own experience if you need to.
In my own businesses, I am always determined to range down, not up, where product is concerned. You’d think it would be common sense to have only a small number of products to make and sell, allowing you to focus on quality and profit, but I continually see businesses racing to increase product range in the pursuit of more sales (cash flow).
Find out where, and from which products your cash flow stems and cut the wastage (80/20 principle). Never stop improving the quality of your product or service!