How to Increase Your Business Cash Flow

When you envision your business, what do you see?

Do you see a fancy four-person office?

Do you see windows overlooking prime downtown real estate?

When we think of what success looks like, too often business owners get hung up in vanity metrics.

Business owners need to be cautious of clinging to material “growth” that provides a sense of instant gratification.

Your business cash flow will suffer if you are going into debt to pay for material “growth” especially if the debt is compounding interest through a business loan.

Business owners must cautiously consider each financial decisions.

For example, perhaps you are interested in a $29.99 monthly subscription to a social media posting platform that enables you to post to Facebook and Twitter with one post that can be edited to match the text structure of each platform.

Now, you may be thinking, why should I worry about a $30 per month subscription?

In this example, you need to ask yourself several questions. Do I have to sign a contract? What is the cost to break the contract? How much will the service cost annually? Is there a free version of the service that will meet my needs? if not, is there a similar service that has a free version or is free with less features what will do work for my business..

Tip: Always run the numbers on any subscription based purchases, particularly the annual cost.

Your expense decisions can vastly change the trajectory of your cashflow success over time!

“When business owners place vanity metrics above cashflow (the lifeblood of their business, according to Fred Parrish), then they are destined to fail.”

How can a vanity metric purchase negatively affect your businesses financial sustainability?

Consider this scenario:

You are operating a marketing firm that has garnered several mid-level clients in the past month. You suddenly find yourself with $10,000 in liquid income and you feel the extreme need to reward yourself for your hard work. After all, you certainly earned it!

So in what do you invest?

How many of you are thinking “vacation”? Vacations are great rewards when you have taken “hustle and flow” to the next level. But, how are these cash decisions going to propel your business forward?

I am not saying you should not enjoy the fruits of your labor.

However, if you get in the habit of viewing cash flow as an owner earning, you will not be able to weather the more challenging months when expenses exceed revenue.

And believe me, this WILL happen.

Another cash flow pitfall is the proverbial “counting your chickens before they have hatched” –an old saying that still rings true and should be headed.

You may decide to spend your business’ cash flow gambling on a prospective client deal you are positive you will close next month. Then, two months pass and you still have not closed the deal.

But, the money is surely gone.

It is even possible you put your cash flow into the negative. Was this the best possible use of your hard-earned surplus?

Tip: You must cultivate a deliberate and strategic mentality shift towards your business’ cash flow, “Ownership vs Non-Ownership”.

Consider the thought, you don’t have to own every tool in your neighbors tool box, you can always borrow their investment, right?

How to Increase Your Business’s Cash Flow

First, start by strategically reducing the purchase of liabilities, and steer your financial plans towards investments.

Review your budget, (if you don’t have one, you need one now!) and unsubscribe to any services you are not using on a monthly basis. Perhaps, there is a free option you can leverage, this may take some research, but it will be well worth it.

Start with analyzing your everyday, every week purchases. You will be surprised just how much a specialty coffee or eating lunch out everyday can add up over one month.

Let’s take this scenario a step further: You purchase a speciality coffee at $4.50 a purchase 3 times a week and you are averaging lunch out $15 a purchase 3 times a week also.

Speciality Coffee Expenses Monthly: $4.50*3=$13.50*4.3weeks (on average in a month per year)= $58.05 monthly cost*12 months in a year= $696.60 yearly coffee expense.

I won’t bore you with the math for the lunch outings but it’s around $2322 a year.

Now, what could you do with $2300?

If you purchase investments instead of liabilities, you could afford a marketing budget for customer acquisition?

And, if you gain a 3% lead generation with 20% average return on your investment in customer acquisition, then you’ve just increased your cash flow (exponentially)!!

Remember, cash-flow forecasts are advanced calculations and thus not fail-safe. More than likely, you are starting out like the majority with limited capital and unpredictable income.

Tip: Keep a frugal mindset when budgeting and stay cash-flow conscious in financial management in all aspects of business transactions. Frugal business mindset resource.

How to Proactively Marketing to Your Target Customers

First, word of mouth marketing is not a proactive marketing technique, and I strongly urge you to not throw all your eggs into that basket, especially in the beginning stages of your brand development.

Word of mouth marketing can produce results..

I do agree that your biggest marketing asset is your existing customer base, and that people love reviews.

But.. you can’t deny that you need customers first, right?

Invest in developing and executing an active marketing strategy for your business.

Remember, quality over quantity in all marketing ventures be that content creation, link building, or even pay per click advertising.

Everything you promote should be highly tailored to your audience with oodles of value they can’t say no to.

You should have a strong promotion strategy at the ready for all campaigns.

Tip: You must create buzz-worthy content and encourage the hive.

Why You Don’t Need An Employee!

Wait to hire employees if you can. Especially full-time, benefitted employees. If you can, subcontract for projects and stay within the law (disclaimer: talk to a good lawyer to make sure you are within the law).

Let’s face it, in 2017 employee engagement and productivity are low, that is why freelancers are great!

Everyone is glued to their phones, and that hits small business owners especially hard when the hours you are paying for are not producing results.

Tip: Consider outsourcing your most dreaded tasks, so you can enjoy the reason you started your business.

What You Should Consider Paying A Professional For…

Consider outsourcing the two most popular pain points for small business owners: customer acquisition “revenue”, and book keeping (paying fewer taxes).

  1. Hire an accountant who can categorize and file your expenses and income correctly to benefit your bottom line.

2. Hire a digital marketing service team to drive revenue through customer acquisition.

Why are both great to outsource?

You get monthly deliverables often times for a flat monthly rate and you don’t have to worry about downtime, days off, sick day, productivity.

This can save you tons of money and time.

Food for thought:

Do you know how much an employee really costs? If you want the real breakdown, check out this infographic.

Employer Cost for Employee Compensation

Why you shouldn’t get an intern.

You know the saying, “Get an intern to do that”? Well, if you find yourself in need of help and you are considering if you should hire someone or find an intern consider reading this article by Business Insider , it may help steer your decision in an informed direction.

Quick introduction to intern laws from the Department of Labor below:

2. The internship experience is for the benefit of the intern.

3. The intern does not displace regular employees, but works under close supervision of existing staff.

4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.

5. The intern is not necessarily entitled to a job at the conclusion of the internship.

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

In short, an unpaid internship has to be almost wholly for the benefit of the intern and not the employer — and that’s often not the case.

Now, this article isn’t about hiring an intern, but I am pointing out internship guidelines because it is important for you to know what you should invest money in.

For instance, a terrible use of an intern is to task them with a cash flow (lifeblood) task that is meant to strategically increasing your revenue.

I’ve seen it first hand, interns tasked with posting daily on the business social media page.

99% of what they post is company propaganda and of no real value to the business audience.

Also, they normally don’t understand brand or social media marketing strategies.

Moral of this story?

When your business makes revenue consider reinvesting that money back into your business.

Consider the fancy office overlooking the city, the new employee, or the vacation and weigh them by asking yourself if the item is a liability or investment.

In the beginning of your business, you want to avoid vanity investing. You need to take your business to the next level with the best brand awareness marketing team that can scale and build on momentum.

Remember, the best part about outsourcing your digital marketing team? You don’t need to worry about paying employee taxes, providing benefits, or a christmas party.

If you are passionate about your business succeeding and increasing your cash flow, the best way, the smart way, is reinvesting your hard-earned money back into the company.

Later on, you can certainly enjoy the vanity investments (and you SHOULD!). But you can’t gobble all your growth at first, you have to maximize those dollars and reinvest in yourself!

Interested in learning more about what a digital marketing team can potentially do for your business?

Need some marketing advice?

Let’s chat. Email me @ brodycg@aidokaseo.com