The Lifeblood of Your Business - Cash Flow or Employees?
Written by: Peggy Niles, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
When you hear the phrase “lifeblood of your business”, what comes to mind and do you have the right mix? Let’s keep it simple: the lifeblood of your business is your cash flow and your team! That being said, how do you make sure you have the right mix to make your business model sustainable? I bet you thought I was going to say it was your customers, and I’ll admit it. I can see why, after all, if you’re not making sales, you definitely can’t stay in business. The problem is that many companies out there have the customers, but are still draining their bank account and operating at a loss.
This doesn’t even touch on the negative impact on the owner’s lifestyle. As you already know though, the obvious question is not what the lifeblood is, but how do you strengthen or get more of it?
Let’s take a look at a couple of examples:
Let’s say your revenue has plateaued. Your cash inflow has remained stagnant and your cash outflow may have remained the same or not. Either way, your net cash flow / net profits have most likely declined over time. You have to figure out a way to bring in more revenue. There are a few things you can do here – increase the cash inflow, decrease the cash outflow or both.
Ask your team for ideas to increase the cash flow or suggestions to create efficiencies in producing the services and products at a lesser cost.
Reach out to existing and prospective clients and work together to forge ahead.
You’ll want to develop new revenue streams, create or adjust processes to be more effective, and/or reduce costs directly by elimination or vendor negotiations.
I suppose you could do all this alone, but it becomes much more difficult if you want to enjoy life and truly scale your business.
Now let’s take a look at a situation where you are experiencing rapid, unexpected growth. It’s great, right? A dream come true – you have more clients coming in the door than you ever could imagine. Now what? Do you have the capacity to handle the growth? Can you provide the same quality service and product that you did before?
Can you handle the deadlines?
Once again, it will depend on two things, right? Your cash flow and your team.
Now some may be asking, your cash flow? What do you mean I have a ton of business coming in right now? Of course, I have the cash flow. Well, you certainly will have the cash inflow, but what about the cash outflow. You may not have the resources readily available, causing your outflow to match your inflow, which doesn’t give you any benefit.
"When you hire too fast, at a time when you have to pump out more workflow, you may be doing yourself more harm than good."
When you’re experiencing growth, you don’t want your inflow to match your outflow $1 for $1, do you? There’s no benefit to you when you look at the bottom line. That would mean you’re working harder, but receiving no additional payback or reward for your efforts. You want to be able to handle the increase in volume at a reduced rate so that your revenue is increasing at a faster rate than your costs, thus increasing your bottom line profits. This, in turn, allows you to have the capability of more impact and more growth.
You have to be careful here because, typically, more team members are necessary in this case. Still, many companies have hired too many - too fast, again causing a huge unexpected outflow of cash. And that’s just one side of the coin. When you hire too fast, at a time when you have to pump out more workflow, you may be doing yourself more harm than good.
You run into issues of knowledge, skills, training, defined roles, process changes, lack of communication; the list could go on and on, right?
What’s really missing in both of these scenarios?
The proper planning and forecasting. This allows for the creation and predictability of growth as well as the ability to handle it. When you can anticipate the growth, you can leverage existing resources. In the end, the result will be the right mix of your business’ lifeblood!
Peggy Niles, Executive Contributor Brainz Magazine
Peggy Niles is a Profit Strategist and Business Consultant who helps established business owners transform their companies from the daily grind to one that keeps running smoothly while the owner focuses on the things that matter most to them. She walks her clients through her 3-step Quantum Scaling System℠, a proven system to reach their 5 year goals in 12-24 months. With 30+ years of experience, she specializes in scaling strategies, leadership and process creation/management. Also, as a Certified Public Accountant by trade, Peggy always keeps an eye on the effect actions and strategies have on a business’ bottom line. She believes small business is the best way to make a difference in the world - that’s why she helps her clients grow and scale their companies, without the overwhelm or laboring endless hours, so they can fulfill their dreams and gain the freedom, and life, they’ve always wanted with the impact they deserve.
