All businesses suffer a downturn. Even Apple & McDonalds had tough years in their history, losing money and not being sure whether they could make it.
But why do businesses go bust?
Most business owners thinks it's because of a lack of profit.
Unfortunately, this is wrong.
Businesses go bust from the luck of cash.
You can only spend cash, not profits. Try to go to the restaurant and buy a dinner with profits. Nobody will take profits; everybody wants cash.
So, what is the most significant factor for cash flow?
It's TIME! So you can improve cash flow and solve many problems by just changing time.
It's not the only thing, and it could get much more complex, of course. But this is the first place to look for and could give you some time to breathe, especially if you are already thinking about calling the lawyer to close your business or start a restructuring.
But to be able to do it, you have to have a rapport and excellent relationships with your suppliers and partners. The challenge is; if you struggle financially, the bridges could be burned down already, and it's hard to do a deal without rapport and trust.
Yes! Only one deal can change it all and save your business.
If your bridges are burned down, your best chance is to bring a "white night" to save the day and make these magics possible. A person who will go to your business to solve all the challenges, not someone who started it (in the counterpart's point of view).
Of course, the best option is to never get into these issues in the first place.
To do that, you should use this magic formula:
Manage your assets (balance sheet, employees, payroll $, etc.) to effectively produce more revenues
Be efficient in turning your revenues into profits
Turn your profits into cash flow
Turn your cash flow into FREE cash flow
Not only the blueprint needs to be correct, but the effectiveness of each step needs to be correct. Every 1% increase in assets should increase revenues by more than one percent. And it should produce even more growth in profits. And even more in cash flow. And even more in free cash flow.
Measuring it every month is essential, and 99,9% of small and medium-sized businesses don't do that. If you do; your business will be a valuable asset.
There is really no reason to go bust if you still have revenues, even if you have a cash flow problems or a lot of debt.
We can help you to save the day, invest in your business and make it valuable again.
So if your business is at least 500 000 USD in annual sales revenue, schedule a call, and let's find a way together. You will get a solution and offer in less than a week.
How to not just turn things around but build a valuable business and avoid the main reason why 96% of all companies fail?
See, most businesses are successful when the economy is booming. But most of them fail when the economy busts and economic recession hit.
Historically, the cycle is ten years or so (now it's longer due to all the money printing). So most businesses' longevity depends on when they started their business. The recession could hit in your fifth, sixth, seventh year, etc., and then you would crash as the economy crash.
So to avoid being the statistic, the solution is not related to optimizing and maximizing upside. Instead, the real key is managing the downside, limiting it, and turning recessions into your greatest opportunities.
So what is the no. 1 lever that can change it?
It's financial control and creating a financially sustainable business that runs on healthy financial fundamentals.
Unfortunately, 90% of S.M.E. businesses use cash accounting in the U.S.A., so the nature of this accounting principle corrupts the data and eliminates the option to have any financial intelligence.
In addition to that, most companies do accounts only to file the tax return and optimize (change) data to save on taxes. So the numbers are not accurate.
And when they learn the numbers for a year, they don't know how to read them. So there are only 2-5% of small and medium-sized businesses that regularly bring the correct numbers and can analyze them, read them, and make the right decisions based on them.
Are these numbers similar to the business failure rate only by coincidence? I don't think so.
Because of these facts, most business owners fly the plane called business blind for a year and then see whether it lent or not. Sorry, that is not correct, most of them cannot read the numbers even if the numbers would be valid, so they are flying without understanding all the dials in their cockpit. So they don't know how to correct the course, change actions and change the outcomes and after a year doesn't even know whether they lent or not, because they don't know how to choose the right destination (metrics and targets).
Should you want to beat the odds and survive and thrive long term, you need to know how to read your business dials and turn the numbers into actions you need to take to improve these numbers and build a healthy business.
In addition, when you do that, most businesses will bring 10-15% of revenue in cash straight back to their business, which usually solves most business problems.
And! The optimized business has more room for error and will handle economic downturns so you can survive and take over the assets of other companies that failed.
Imagine it; should you have a 1 million dollar business, what would you do with 100-150k in extra cash? Would it help you to solve all your problems and grow your business to the next level? And what if you have 50-100% more money regularly without increasing your revenues? (Yes, it's possible! And it takes only 90 days to do that in most cases.)
How would your company change? How would your lifestyle change? How much more valuable would your business be? Maybe two times? Three times? Perhaps much more, because now your business is not just eating cash, but it produces a massive amount of money.
To make it a reality, do these steps:
start the second set of books with accrued accounting and get accounts once a month
learn to read these numbers and know the blueprint to move the right levers to make these numbers work for you
or find someone who will turn these numbers into actions and will find the hidden cash in your business that you are now leaving on the table
When you do that, you will: bring back the cash left on the table, solve your cash flow problems, optimize and maximize cash flow and so the value of your business will grow, and you will build a recession-proof business and turn crisis into your biggest opportunities.
Krystof
P.S.: Any follow-up questions? May I help your right now? Just press the reply button and send me an e-mail. I do reply to all e-mails!
P.P.S.: If we are not already connected on LinkedIn, send me an invite, and let's connect. I am sharing more information to my Linkedin network that is not very practical to send over e-mails.
