Posts Tagged ‘cash’

9 Tips to Improve Yourself and Your Business

May 2, 2011

by Doug Smith, President, The Woodhaven Group, LLC.

As an owner or key person in management you must grow your business and increase the cash flow needed to achieve the goals of the company.

I have found most owners do a good job of addressing both the short and long-term needs of the company.

However, there is one area that usually does not get addressed. That is the failure of the key person to take care of himself.  If the top person does not take care of himself then the success of the company is in jeopardy. I know.  I have been there and learned a few tips I want to share:

  1. Maintain good mental health:  It is too easy to get fixated on day-to-day crisis management.  At some point this can affect your ability to focus and solve problems.  The best solution I have found is to have friends outside the business that you can use to unwind with.  It might be a weekly golf outing or attending a ballgame.
  2. Maintain good physical health:  This means exercise.  Not only will exercise help keep the blood pressure in line, it will also help alleviate stress.  The best way to exercise is to treat it like a meeting.  Schedule it into your day at least 3 times per week.  Also, don’t forget that annual checkup.
  3. Educate yourself:  This can be on business or nonbusiness topics.  If nothing else, we all can spend time staying current on how the latest developments in internet marketing affect our sales!
  4. Pay yourself first:  You deserve to make a fair return on your time, effort and risk that you are taking.  Pay yourself enough dollars that you have money left over to spend on something frivolous for you or your family.
  5. Set aside dollars for the long-term:  Make sure you are allocating money for the long-term needs of your family such as retirement or that vacation home.  Your company has long-term goals that need funded.  You should also have personal long-term goals that get addressed.
  6. Stop beating yourself up:  There has not been a CEO or owner yet that is right all the time.  Stop stressing over that past decision that did not work out.  Keep looking to the future.  You will more than make up for old mistakes with the wise decisions you will make going forward.
  7. Hire the best, pay them, and get out of their way:  Do I need to repeat that?  Make your job easy by hiring people better than you are.  That means you will have to pay those key people good money and then do not micro-manage them.  Some of the most fun I have had as a CEO is watching managers develop and being there to help them when they stumble.
  8. Don’t procrastinate! Make the decision:  Failure to make a key decision such as closing a branch or letting someone go can hurt the company, sap cash flow that is needed for projects to grow the company and destroy morale.  For the good of the company, don’t put off doing what has to be done. It goes with the job title.
  9. Ask for help if you need it:  Many owners and CEOs let their pride get in the way.  If you are not getting the results you need ask someone from outside the company to help.  It might be another CEO, a consultant in your industry, or a retired business owner.  They can take a fresh unbiased look at your problem.

Remember, your business can not grow if you are not on top of your game.

Take care of yourself while taking care of your company.

 These tips have worked for me. I would be interested to hear from others who may have tips to add to this list.

10 Creative Ideas To Increase Sales Now!

July 13, 2010

by Doug Smith, President, The Woodhaven Group

As a business owner or CEO you must create and maintain positive cash flow in your business.  It is your #1 priority.

Let’s be clear where that cash flow is not going to come from.  The amount of loans to small businesses fell in the 1rst quarter of 2010 compared to 2 years earlier.  Banks and other private lenders are being more choosy about who is getting any type of small business loan.  Regardless of good cash flow projections and collateral, some businesses still are not receiving the lines of credit needed to operate their businesses.

As an owner, I would not automatically assume funds will be available from my local lender.      

There is one solution that will work.  The small business owner must find ways to increase sales.  The smart owner has already cut expenses, gotten extended terms from suppliers and probably tapped into personal investments.  More sales will bring more of the business cash flow your company needs to survive and grow.

Your company will need to do creative and unique tactics to spring loose the purse strings of the consumer or business who is your customer.

Start doing these 10 things today to increase sales:

  1. Learn more about the needs and wants of your customer.  Find better solutions to their problems and market to that.  In one word, “listen” to the individual customer more than before.  You may find that there is a whole category of products or services your company should have been selling to him that will increase your sales.
  2. Monitor and use social media.  There are many ways to use social media to generate sales.  The overriding method is to use social media to build relationships with customers and noncustomers.  Monitor for  complaints about competitors and offer a solution.  Monitor for complaints about your own company and be there to take ownership of the problem.  Incorporate surveys, contests, and links to websites, including your own.  All of this can position your company as a credible source of information. The end result will be an opportunity to create a new customer.
  3. Use email marketing to strengthen customer relationships.  This is not an opportunity to just email blast special offers constantly.  Instead, use emails to target a message about the benefits of your product, new information on your industry, an interview with a local business leader or an update on coming events involving your company.  Email marketing is an inexpensive way to stay in touch with your customer.  A call to action can still be included to trigger additional purchases.
  4. Get lapsed customers reinstated.  If you sell to other businesses then call on the company.  If you sell to consumers then send a personalized letter to each customer with a special coupon.  Don’t let them forget about you.
  5. Offer extended terms.  Help your customer finance the purchase.  Chances are your customer needs your product.  Here is a way to show that you are there to help them.  Instead of normal 30 day terms, extend out to 60 or 90 days.  Of course, make sure this offer is to creditworthy customers.
  6. Offer an unusual promotion.  Check the gross margin of your most popular products and offer something different to pry loose the spending of your prospect.  It may be a discount, a free service with purchase or a bundling of products.
  7. Run a 3 day limited promotion.  Make it unadvertised and exclusive to your customer database.  Communicate this with an email and followup contact by phone or in person.
  8. Offer a special after hours private shopping event.  If you are a retailer, tie in with a local not for profit and include their database in the invitation list.  Have a portion of the proceeds go to the charity.  Include wine, music, and giveaways at the event.  This could easily be held on a Saturday or Sunday evening.
  9. Create a white paper.  Your prospects and customers are probably having cash flow issues also.  Offer tips on how to save cash.  This will work for both businesses and consumers.  They will appreciate the free advice and use their new-found cash to spend on your products or services.
  10. Ask for and get testimonials.  Then send them out with a promotion to both prospects and customers.  There is no method of advertising more effective than a third-party advocate.  By including existing customers it will reinforce that they made the right decision by buying from your company. 

Use one or more of these ideas to pump up sales and increase cash flow.  Keep track of results and show your banker the action plan, goals, and the resulting increase in sales. 

You may see your banker wanting to make a loan to this well run growing business of yours.

A Fool Proof Way To Generate Business Cash Flow Now!

July 11, 2010

by Doug Smith, President, The Woodhaven Group

Do you have customers who purchase from you daily, weekly or monthly?

Would you like to have those customers help you with your business cash flow?

No problem.

Here is what you can do.

Let’s say you are a chiropractor who charges $50 per visit and your average customer comes to you for 2 visits per month.  Offer your customer a discounted package of 12 visits, 30 visits or 52 visits if they pay upfront.

Impossible to do, you say.  It is happening everyday across America.  Currently, the average person earns maybe  1-3% at most on their cash if they invest in Treasurys or CDs.  The chiropractor might offer a discount of 10-15% for a package of visits.  It is a great deal for his customer (patient) and he gets use of the cash immediately.

Here is a sampling of businesses that could benefit from this pricing strategy:

  • Hair salons or barber shops
  • Massage therapists
  • Yard maintenance companies
  • Physical Therapists
  • Oil change companies
  • Car Washes
  • Commercial window washers
  • Residential cleaning services

An added advantage to using this approach is that it takes your customer out of the market.  If your customer has “prepurchased” from you, then chances are they will not be going to your competitor.  The only caveat to remember is that you have received your cash upfront.  It may be smart not to spend all this cash at once as this future cash flow will not be coming in as it has in the past.  A good cash flow forecast would be in order to assure there will be  no short falls.

Discounted packages are a core pricing and sales strategy for many small business owners.  You may want to test this program to see if it is right for your company.

Use This Depression Era Program To Increase Business Cash Flow

July 9, 2010

by Doug Smith, President, The Woodhaven Group

Layaway programs are helping both consumers and retailers who are cash strapped.

During the Depression of the 1920s and 1930s, layaway programs were started to help shoppers buy items for Christmas from retailers.  For a small down payment, the retailer would hold the merchandise while the customer made weekly payments.  When the final payment was made the retailer handed over the merchandise to the happy consumer.  

As credit cards became more popular, layaway programs were eliminated.  Today, more and more consumers are either cutting up their credit cards or reducing the amount charged.

Smart retailers and businesses are reinstating layaway programs as a method to generate sales and help the shopper’s cash flow as well as the cash flow of their own business.

It’s amazing the variety of products and services that are using layaway programs.  A few I have seen are for:

  • Furniture
  • All types of big-ticket apparel
  • Jewelry
  • Vacation trips
  • Tickets and lodging to music festivals
  • Toys
  • Televisions
  • Cosmetic surgery of almost any type

In my opinion, one of the leading retailers using layaway most effectively is Sears and their subsidiary, Kmart.  To get ideas how to structure your own layaway program go to Sears layaway site right here.

Is layaway the right program for your company?

I would suggest doing your own research, talk to retailers and businesses who have tried layaway and test it on a few products or services.

You just may find this is one more tactic in your sales and pricing strategy that will help increase your overall cash flow.

Create Cash: Be Your #1 Vendor

June 17, 2010

by Doug Smith, President, The Woodhaven Group

Small and medium sized businesses should borrow a strategy that is being used by some of the largest companies over the last 18 months.

Large companies have been accumulating major amounts of cash.  Some of this has been used to pay down debt and improve their balance sheets for the analysts and shareholders on Wall Street.  An even larger reason may be the concern about the economy in the future.  The smart managers want a cash cushion on hand to offset unexpected surprises in the near term.

While certain parts of the US economy have improved and seem to be trending upward, many believe we are still not out of the woods.  With massive federal and state debt, a very cautious consumer and events like the oil spill it becomes harder to predict the future.

What should you do?

As an owner or CEO of a small or medium sized business I suggest creating a cash reserve like the larger companies.

How do you do that?

When planning who is getting paid each week include your own company in the accounts payable schedule.  Set aside a small amount each week in a stand-alone account to act as a corporate nest egg if and when the time comes that you will need the backup cash.

You will be surprised how a small amount set aside each week will add up over time.  Don’t be tempted to dip into the account to fund a discretionary trip or new vehicle.  It is an emergency cash back up.  Keep it that way.

If the big companies can do it, so can you.

Save Business Cash Flow With Smart Use Of Employee Overtime Hours

June 14, 2010

by Doug Smith, President, The Woodhaven Group

Consider this scenario.  Your company has had to operate through an extremely bad economy.  As owner or CEO, you were proactive  by reducing expenses to bring the breakeven of the company in line with reduced sales.  This reduction in expenses included eliminating employees.  Tough decisions to make but, looking back, it was obviously the right thing to do to maintain positive cash flow.

Does this sound familiar?  You are not alone.  A lot of good managers had to make the same type of decisions over the past 2 years.

Sales are now beginning to rebound and while progress is slow, it appears the worst days are behind the company.  Now the question becomes…… do you hire new employees to replace the ones you eliminated?

Here is what I have done after other economic downturns that required staff reductions.  Before hiring additional hourly workers or non-exempt employees do this instead.  Take the current employee group and give them overtime hours.  There are 6 benefits to doing this:

  1. It puts additional dollars in the paycheck of your key hourly or non-exempt employees.  They will appreciate the extra dollars coming their way.
  2. You will not have to spend valuable cash to recruit and interview replacements.
  3. There will be no new training cost since there will be no new hires at this time.
  4. There will be no added workmens compensation insurance nor employee benefit cost incurred without new employees.
  5. Most new hires make mistakes that costs the company cash during their ramp up period.  This potential expense is eliminated. 
  6. If the increased sales is not for real then you do not have to cut back employees again. 

Once you see the new sales increase is going to continue and overtime dollars grow, then it will be time to hire added staff. 

Until then you have saved cash, your company has survived, and there is a happy group of employees ready to grow the company into the future.

6 Gaps In Business Insurance That Can Destroy Cash Flow

June 7, 2010

by Doug Smith, President, The Woodhaven Group

Business insurance can be a godsend when something unexpected happens that can cause the daily operation of your business to be interrupted.  It is cash well spent.

Most owners and CEOs do a good job of anticipating what needs to be covered and making sure the company has sufficient insurance.

But we are living in a different time.

What used to be enough insurance coverage may not be sufficient today.  It is more important than ever that your insurance agent understands your business and works closely to protect the company and it’s shareholders.

Here are 6 areas to discuss with your insurance agent and assure yourself that in case of loss the company is covered to the extent it needs to be.  If not, the gap will come out of the cash flow of the business:

Business Income Insurance:  If your business is destroyed by fire, tornado or some other catastrophe you need to cover income and expenses until the company can be fully operational again.  Most businesses have coverage in this area.  The problem may occur if your insurance coverage levels are for the size of the company 5 years ago.  Has the coverage been updated to reflect your growth.  Maybe the policy got switched to a house account at your agency and no one has updated this important coverage.  Also, make sure you are clear what conditions have to exist to get reimbursement.  That may vary by industry and type of company.

Law and Ordinance Coverage:  You have successfully grown the company in an older building to save on overhead.  Now it burns to the ground.  Check now to see if your coverage is for replacement to the level it was before.  If it is then you may have a gap if building codes have been modified.  There may be new construction codes to address hurricane, tornado or other environmental needs.  I have also seen aesthetic codes requiring newly constructed buildings to have brick exteriors.  Ask your agent about law and ordinance coverage and if it is applicable to your business.

Business Personal Property:  Do you have a business that requires taking important tools and equipment offsite?  Some business personal property insurance policies only cover  loss within 1000 feet of your property.  If you put tools in a van and go to another location you may not be covered.  The solution would be “transportation coverage.”  Ask your agent to verify if this is an issue with your policy.  If it is then it needs corrected now.

Electronic Data Processing Insurance:  We are in the age of the computer.  Viruses, power surges and humidity levels could damage your software or hardware and result in loss of important customer data.  This could mean you no longer can access accounts receivable reports or customer databases.  If your company has developed an in-house CRM system you could have a real problem if the data is infected by a virus.  It is called EDP insurance.  Do you have it?  Do you need it?

Cyber Liability Insurance:  This was not necessary years ago.  However, if today your company has a website that captures email addresses and sends enewsletters or sells products over the internet, this may be coverage you need.  Issues can range from computer viruses unknowingly being passed on, identify theft or even copyright violations arising from content on your site.  Ask your agent what coverage is appropriate for your type of business.

Umbrella Liability Insurance:  This is additional liability coverage on top of regular liability coverage.  Do you have enough umbrella liability?  If your company vehicle hits a surgeon and he cannot use his hand to operate again are you sufficiently covered?  Maybe your company is not at fault but many umbrella policies will cover legal fees to defend your position.  If you have high enough liability coverage it gives the carrier all the more reason to mitigate the claim down or defend you against frivolous lawsuits.  Umbrella policies tend not to be expensive so make sure you have enough coverage.

As you can see, insurance has to be managed like everything else in your business.  Do not take for granted that your coverage is sufficient.  

In order to protect your business cash flow take the initiative to make sure your insurance agent is up to date on all aspects of your company.

Save Time And Cash With A Few Good Performance Measurements

May 27, 2010

by Doug Smith, President, The Woodhaven Group

Next to more sales and more cash most owners and managers would list a desire for more time in their day.

How does an owner keep track of what is happening in the company when he or she is consumed with meetings, addressing emergencies and fulfilling commitments outside the office?

It is a challenge to say the least!

I have found there are a few measures of performance I can access daily and weekly that quickly tells me if things are going as planned.  These measures almost act as early warning signals that a small problem may be about to become an all encompassing issue the whole management team will have to address.  I refer to them as “How are we doing” metrics.

Every manager and every company is different.  I encourage you to identify a few key metrics that will work for you and your business.  My suggestion, however, is to not overdue the number of measurements you are tracking.  If you are having to dedicate staff to just preparing a few indicators for your review then you are probably looking at too many.

The measurements should be easily accessible and help you improve the company.  If they cannot aid in increasing sales or cash flow then maybe you can review that data later.

Over the last 20 years there has been a mini industry created in performance measurements.  Many PhDs and consultants have made a career in marketing  “Balanced Scorecards”, “Strategy Maps” and other indicators of productivity.  I find most of them interesting but often too costly to prepare and sometimes ignored by management teams.  If you use these and they work for your company then by all means you should continue.

The measurements I use appear to be obvious ones but that is OK.  They have worked for me.  Maybe they might work for you:

Cash Report:  This is a daily report that  shows the bank balance, deposits made, payments transmitted and ending balance or float.  I never want to be surprised on cash, whether it’s coming or going.

Daily Sales:  I know my sales plan and this tells me if we are tracking to hit it.  If it is a company that issues leads daily I will want to know conversion rate.  If there are multiple locations, product lines, or divisions I will want to know if all of them are tracking to hit their monthly sales goals.

Accounts Receivable Aging:  I want to see this weekly and determine who owes us money and if the  amount is increasing.  In my opinion, we deserve to be paid for the quality work we did and I am very aggressive in wanting to be paid on time.  I will also do a mental calculation of days of sales outstanding.

Accounts Payable Report:  I want to see this weekly and compare the balance owed against cash on hand, jobs moving through the system and new sales being generated.  In the event I get a call from the CEO of my top supplier, I always want to know what we owe and if we are current.

Marketing Percent to Net Sales:  This is normally a monthly report that tells me if we are overspending to create sales.  Many companies have gone out of business from spending too much in this area.  If sales are trailing the plan dramatically during the month I may cut back some area of marketing before the month is over.

These are the key performance measurements I stay on top of.  There are many other reports that I will review from time to time such as Revenue per Employee, Revenue per Visitor on a website and, of course, monthly financials.  But these 5 performance measures are important to me.  You may have different ones that work for your business.

Regardless what metric you use there are 3 important elements to keep in mind with each report:

  1. Establish a beginning baseline from which to measure results.  All measurements need a starting point.
  2. Always look at  trend over time of any performance measurement.  Are the current results just a blip or is there a pattern occurring?  Some management teams like to illustrate trends with a graph for impact.
  3. Take action.  Unless the results were a blip then, at a minimum, you need to ask more questions or look at additional data.  Is there a problem with pricing, a promotion, or a key account?  Are there quality issues preventing collection of money due?  Information is only good if you do something with it.

A few good performance measurements can save time, increase your personal productivity and improve cash flow and profit.

Make sure they exist in your company and are used.

Reduce Surprises With A Rolling 3 Month Cash Flow Projection

May 25, 2010

By Doug Smith, President, The Woodhaven Group

“Cash is more important than your mother.”  A west coast business professor once said that and as a former CEO I agree.  Just for the record my mother would agree with me.

With all the volatility occurring in the economy it is very difficult for any business to plan ahead.  We see turmoil in Europe that may reduce exports, a consumer only beginning to spend again, and private and public debt at uncomfortable levels to say the least.

What is an owner, CEO or senior manager to do in an environment like this?

First, I would remind you that your company runs on cash.  If you run out of cash you either have to replace it or go out of business.  Therefore, it is best to anticipate any peaks or short falls in your near term cash position so you do not find yourself making crisis management decisions when, for instance, it is time to make payroll.

The best tool to use is a rolling 3 month cash flow projection that lists your anticipated inflows and outflows of cash.  In otherwards, where is your cash coming from, where is it going and how much do you have left over?

In my opinion, this should be a monthly cash flow projection that is updated weekly.  If cash is extremely tight and unpredictable then a rolling weekly cash flow forecast is even better.

Meet weekly to update the projections with key management team members.  A side benefit will be a clearer understanding by everyone where the most productive use of cash is occurring.  I found this to be a positive energizing exercise for my management teams.

What to do if you see a shortfall in cash coming?  Here are a few options:

  1. Have a line of credit in place with your bank and use it as needed.  That is what it is there for.  Your banker should receive updates of your cash flow so he can anticipate the request and payback.  He will be impressed how you are managing your cash situation.  He will probably wish his other clients were doing similar calculations.
  2. Speed up payment of accounts receivable.  There always seems to be late payers and being aggressive in collecting may be all the added cash you need.
  3. Get extended terms from your key suppliers.  Rather than just delay paying, I have found it best to ask them for a temporary extension on terms.  If you have been a good customer and paid as agreed this should not be a problem.
  4. If you are a manufacturer one solution may be simply to return old inventory to your supplier and get a credit.  Apply the credit and it may actually offset a portion of the next invoice due.
  5. Cut expenses.  No doubt in the weekly management meetings,  areas will be identified where expenses can be reduced without hurting revenue. As CEO or owner you may have to make the final decision when and where to cut in order to get the action that needs to be taken.   

A rolling cash flow projection is one of the best management tools there is.

Be proactive.  Anticipate your short-term needs and you should not have any cash flow surprises.

Use A Collection Attorney For Delinquent Accounts Receivable

May 11, 2010

by Doug Smith, President, The Woodhaven Group

You performed the service for your new customer as spelled out in your contract.  Your management team even did a few things at no charge to make sure this client was happy.

Now it is time for this customer to fulfill their obligation and pay the invoice in full.  Instead, no payment as agreed.  Promises to pay are not kept.  There appears to be no attempt on your customer’s part to work out a reasonable solution.

It is now 60 days beyond the final due date.  Your company deserves the cash from this customer.  You have made sure to pay all the bills in full allocated to this project.

The new question now becomes, do you send this account to a collection agency or to a collection attorney?  There is no hard and fast rule but I know which I prefer.  I will take a good collection attorney every time.

First, I assume the collection is not small which qualifies for small claims court.  Once I have determined that then here are the thoughts that guide me to using a collection attorney:

  1. Without question a letter from an attorney’s letterhead carries  more weight and stands out from the run of the mill collection agency form letters the deadbeat client is probably already receiving.  My attorney’s letter will move to the top of the heap.
  2. If the situation eventually does go to trial then I have had the same person on the account from the start.  There is no hand off from a collection agency.
  3. In my opinion, a good seasoned collection attorney should have more experience and insight into the process of collecting from an account than a  just hired account manager at a collection agency.  My experience has shown that good collection attorneys come across as professional and better able to structure a solution that works for everyone.  However, a good attorney can also go win in court if it becomes necessary.
  4. I have always felt comfortable knowing that with a collection attorney I have someone who knows the law and would not do anything to jeopardize his standing in the local legal community.  In otherwards, there are no legal or ethical shortcuts I need to worry about.
  5. By giving the attorney all of my delinquent accounts he will be committed to seeing every delinquent account through to resolution.

I have heard the one downside to using a collection attorney is that it costs more than using a collection agency.

I personally have not found that to be the case.  Instead, I believe the attorney collects more money more efficiently.  Some attorneys charge by the hour and some by the hour plus a percentage of dollars collected.  I have negotiated a straight percentage (30%) and due to the steady volume given the attorney it has worked well for both sides.  Sometimes one letter collects the full amount and other times he has to go to court. 

Some businesses prefer using a collection agency.  That is ok.

But for me a good collection attorney was like a valuable member of my management team.  Why?

Because he delivered the cash!