Some
General Rules to help You
Sell in the Post Recession economy
The 90's
and early 2000's were a
time of great expansion and sales growth was expected and assumed.
However, as we come out of this recession, this kind of sales growth
cannot continue to be expected. The first step is to watch your current
customers closely. What makes the difference, and will bring them back
next time, is good customer service.
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The
recession seems to be nearing it's end and good times are on the way.
Sales will begin to grow and we will be busy again. End of problem? Not
really: - beware of the cash crunch.
Yep,
as sales grow, cash decreases. How can that be? Read on.
In
the article "What does the CEO of a small business need to Know" I
referred to the importance of Cash Planning. In that same article I
noted that cash flow was more likely to cause your business to falter
than any other reason. How can I say this? Simple. Experience tells me
that most small business owners, CEO's, Presidents, or owners don't
give this important area the attention it deserves
"If
the business is making money, there will be enough cash!" I have heard
this so many times but it is so wrong. Why? Firstly, because all profit
is not cash. Most often the the "profit" is consumed by increases in
receivables and inventory and cash actually goes down. Yes I know you
need inventory, and receivables are a part of business but the point is
if you prepare for them. they are manageable.
So
what do we have to do. The simple answer is to project where we are
going to be in a week, four weeks, or more, up to twelve weeks if you
can. After that, update your projection each week. "That's fine," you
say, "But who's got the time?" A good question, but the answer is just
as good, "Learn to do it properly, and you and your accounts person
will not only have the time, but you will find that the time you have
saved on dealing with crises gives you more time for other things. Now
this is not a platitude, it's a promise.
We
will talk about this a lot more, but just to whet your appetite, the
equation for cash flow is given by (simplified to eliminate financing
effects):
Cash
Flow = Sales - Cost of Sales - Overhead + Decrease in Net Current
Assets - Net Increase in Other Assets.
I
emphasized the "decrease" in current assets because this is where the
"management" of cash flow comes in. This seems more complicated than it
is, and I recommend a little spreadsheet that does all the hard work,
and most of the data will come directly from your accounting system
untouched by human hands.
All
our clients are trained to plan their Cash Flow and we provide a very
neat tool for them to use.
The
Author
After 25 years consulting to small and medium sized companies,
Mike
Anderson, principal of
Train Me To Be a CEO
realized that the most important part of his work was training the CEO,
and the reason he was such a good consultant was that he did that very
well.
Trained as an engineer,
he became a CEO of
a midsize corporation at the age of 35. After a spell at Harvard
Business School he entered the world of consulting.
3.
Ongoing mentorship. Begins with a minimum two
day one on one, but continues with monthly or quarterly follow up
sessions. (Smart and probably Best!) .
References
A New England Contractor
"Mike Anderson has been
working diligently
with the upper management team at (our firm). Mike is extremely
knowledgeable and has an exceptional way of dealing with many different
personalities. He has worked very closely with the Sales Team to
impress upon them the importance of using a consistent method of
estimating. He was instrumental in restructuring our accounting
procedures."
