Tag Archive for 'cash'

Managing the three clocks of small business

“Time Is On My Side,” is the title of one of the classic rock ’n’ roll songs performed by Mick Jaggerand the legendary English band, The Rolling Stones.

This bold statement works in a song, but for small businesses … not so much. The reason is because of the complicated dynamic between time and our most precious asset, cash.

In the marketplace, there are actually three different clocks at work that every business uses: one for operating expenses, one for sales and one for cash. Let’s take a look at how these three clocks impact your small business.

Operating Expense Clock
Every month like clockwork, regardless of sales volume, cash collections or profitability, payroll must be met, rent must be paid, taxes must be remitted, plus phone, utilities, insurance bills, etc., must also be paid. The Operating Expense Clock is hardwired to Greenwich, England for accuracy within a nanosecond per millennium, and nothing stops it short of a global, thermonuclear holocaust coinciding with a direct hit from Haley’s comet.

The only way to influence this clock is through operating efficiencies – you won’t be billed for what you don’t buy.

Sales Clock
This clock is powered by the customer relationships you’ve created so sales result each month. You project when each sale will occur by qualifying prospects and attributing a clock to each potential transaction so that you can budget future sales volume and meet your cash requirements.

How the Sales Clock operates is completely logical and intuitive, but it only works in your favor when the purchase requirements of customers have been met.

Cash Clock
What is not logical or intuitive is the Cash Clock and its relationship with the other two. Think of it like this: Cash is to sales as snow is to cold: You can have cold without snow, but you can’t have snow without cold. You can have sales without cash receipts, but you can’t have cash receipts without sales. And expenses are like weather – you get some every day.

But what hits small business owners hard is that for every glitch in the mainspring of the Sales Clock, there are 1,000 potential sprocket failures that slow or stop the Cash Clock. Consequently, the Cash Clock requires constant maintenance.

Murphy’s Law lives inside the Cash and Sales Clocks, but the Operating Expense Clock is immune to this insidious law and rocks on just like The Rolling Stones.

Small business success requires understanding the three clocks of the marketplace.

###

Check out my latest segment from The Small Business Advocate Show below. I go into more detail about managing the clocks in your small business

Managing the three clocks of small business

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

Small business success fundamentals for 2012

Don’t worry – this column isn’t about resolutions; resolutions are optional.

This is about fundamentals that have served businesses since humans decided to trade with each other instead of taking what we wanted by force.

Focusing on these ten fundamentals will help you have the maximum opportunity to find success in 2012.

  1. Cash is still King. Managing the relationship between accounts payable and accounts receivable is as essential to survival for your business as breathing is to you.
  2. Declare war on excess inventory. Don’t let one piece of inventory spend a night under your roof unless it’s turning or paid for.
  3. Convert non-performing assets to cash. What things were worth last year has no bearing on what they’re worth today, and they will be worth less tomorrow. If it’s not being used, cut it loose.
  4. Employees spend most of your cash. Ask them to identify ways to find efficiencies and maximize margins. Install these into the new year’s budget and operation.
  5. Review all operational steps and eliminate, or fix, inefficiencies. My friend, Michael Stallard, recommends the four “Ws,” “What works, what doesn’t, what do we stop and what do we continue.”
  6. Outsourcing is a best practice. Call a planning meeting and ask this question about every task in your operation: “Must this be done in-house?” Everything that does not directly “touch” a customer is a non-core competency and a candidate for outsourcing.
  7. Keep your banker informed about business opportunities AND challenges. The title of the shortest book ever written is “Loan Officer Courage.” An uninformed banker is a scared banker and you’ll never get help from a scared banker.
  8. Success burns cash. Prepare a financial projection that anticipates at least 10% growth in sales this year. See how that impacts your cash requirements due to increases in inventory, A/R, etc., and start thinking about how you will fund this growth (see #7, above).
  9. If you don’t have a banking relationship with an independent community bank, start one this week This is not a banking alternative – it’s a small business financial fundamental.
  10. Every customer and prospect has expectations that are changing faster than ever before. Keep asking what they want and deliver what they say. Remember, you get to decide what you do; customers decide how you do it.

Focus on the fundamentals, plan for success and grow your small business in 2012.

I talked more about these 10 business fundamentals today on my radio show. Take a few minutes to download or listen now.

Four more 2012 success fundamentals with Jim Blasingame

Check out more great SBA content HERE!




Warning: fsockopen() [function.fsockopen]: php_network_getaddresses: getaddrinfo failed: Temporary failure in name resolution in /var/www/wordpress/wp-includes/class-snoopy.php on line 1142

Warning: fsockopen() [function.fsockopen]: unable to connect to twitter.com:80 (Unknown error) in /var/www/wordpress/wp-includes/class-snoopy.php on line 1142