This article contains the revolutionary secret to beating the ever growing statistics of Business’ not making it after their first couple of years. These five simple steps will change the future of you and your business forever.
Step 2 – Control the Tap & get paid faster!
Imagine a river. A river flows. From high ground to low ground. The higher the ground, the faster the flow.
Step 2 is about HOW FAST cash flows out of your pocket, through your business and back in.
Many businesses suffer at Step 2 with a phenomenon we call “Growing Broke”.
Growth requires cash.
Lot’s flowing OUT. But slow to flow back IN.
And so it’s true when people say, “it takes money to make money”.
Our advice, don’t take too long!
Your speed of cash flow is driven by 4 cycles, measured in days.
1 – SELL IT
How many days does it take for me between first presenting my value and to when the client says YES?
2 – MAKE IT
How many days does it take to either produce my product / service or how long does it sit on the shelf?
3 – DELIVER IT.
How many days does it take us to deliver the final product from when the client said YES?
4 – BILL IT.
How many days does it take for us to bill the client after they say YES and then how long does it take for the money to arrive in the bank?
Cash Flow Days = SELL IT + MAKE IT + DELIVER IT + BILL IT.
So how many days is your cash flow cycle?
Remember: What you measure you treasure.
So let’s crunch some numbers to understand the impact of Cash Flow Days.
Here’s a business who has counted the days of their 4 cycles.
30 + 18 + 10 + 61 = 119 Cash Flow Days. OUCH!
That’s how many days they’re out of pocket.
The flow is slow.
Brainstorm ways to reduce those days.
Most ideas will fall into one of 3 categories –
Shorten Cycle Times
Change the Business Model
If the consistent struggle and grind of living cheque to cheque wasn’t enough, think about what a cash flow day costs you?
Let’s work it out.
Annual Revenue / 365 days = A Cashflow Days
For a million dollar business.
$1,000,000.000 / 365 days = about $2,700.
The cost of 1 Cash Flow Day.
So a 119 day Cashflow cycle means you’re out of pocket $321,300 ($2,700 x 119). – SUPER OUCH!!
Find a smart way to reduce your cash flow days by just 15 days, and that’s an extra $40,500 in your account. BOOM!
And with that, you can –
- Sleep at night
- Pay down your debts
- Make a deposit to your Profit War Chest
- Invest in business growth (see step 3 + 4)
- Turn $1 into $2 (see step 5)
- Build a rainy day fund (3 months Business expenses)
- But it all starts with knowing your days.
Join me next week as I share with you how to widen your now fast flowing river:
Up next, Step 3 – Fill the Bucket, Get More Customers.
Remember, there’s no point turning up the tap if you still have holes in your bucket!
How Inspire Can Help You – Step 1 Take Your Profit First:
Become a Cash Rich Business [Workshop] is a short course for small business owners in Cashflow Acceleration:
- Know your numbers (am I bleeding profits? If so how much and where from?)
- What healthy look like (for my turnover how much should I be paying – Profit, Owners Pay, Taxes and Operational Expenses?
- For my current numbers, how do I get healthy again? (a simple step by step method to get on top of your numbers, build a 3 month cash reserve and put your profit first)
The next Become a Cash Rich Business [Workshop] dates –
At the Cash Rich Business workshops, we teach you how to take your profit first.
Find out when we will be in your city –