Not enough money?

 

Who has enough money for everything they want to do? This article attempts to deal with this common business issue.  Every business has to consider finance in decisions - some more than others. Every business could benefit from increasing their earnings. But the real reason businesses want more money ultimately is so their owners (that's you) can have more money. This article does not deal with bigger questions such as how much is enough in a particular society.

 

One article cannot provide detailed instructions for every reader on how to improve your particular situation. Every business is unique - both in demands and capabilities. But there are common ways to go about identifying and resolving such issues. These are briefly addressed in general terms here. You will need to tailor these for your own situation.

 

There are many possible issues to consider in this issue. First would be the short term cash flow. If that falls too low, the business is in serious trouble. But even having narrowed it to short-term cash flow as a priority, we need to identify what is the specific cause (or often causes).

 

We cannot list all of the possible reasons - there are very many. Money does two things: it comes into the business, and it goes out from the business. So there is the first division - we may need more in - or less out. Of course it's seldom one or the other - usually its a combination. But it helps if we identify which can be dealt with easiest. For example, a quick review of where money is going may suggest quick ways to "plug the hole". If your outgoings are already tightly controlled, then we need to look at ways to get more money in.

 

That shouldn't be limited to thinking you need to sell more. While that could well be a valid longer term goal, in the short term it may lead to sacrificing profitability, those merely deferring the problem. It may be that you can improve things in the short term by better management of debtors and / or stock. Although these are just examples, they are common examples of business development practices that have been proven to work. There are well known techniques for each that can work. Again there is not usually one simple solution - but a range of things which can work together to improve things.

 

Of course they may improve the short-term situation - but if you don't develop, implement and maintain systems, then things will slip over time, and you'll inevitably repeat the same cycle. Those who fail to learn from history are doomed to repeat it. Systematising every aspect of your business ensures any changes you make today will not be lost and need redoing next year. It also means your business will provide more cash when it comes to sell it - not the immediate issue - but a big benefit.

 

After the short term cash flow issues, we can move on to longer term issues. Each area of the business (even if you're the only person in the business) requires some cash to keep developing. This allows for new products or services, marketing, training, systems and so on. Then there is capital expenditure - things that will provide benefits into the future. All of these can be deferred to some extent - but at what cost?

 

Finally, you can expect to receive some cash from the sale of the business - in whatever form that takes. Decisions you make now will affect the value of the business, so that should always be considered. Short term cash flow should never be your primary motivator. Developing a business of value ultimately requires a culture of providing value to clients. Decisions made for short term gain can prove to be expensive in the longer term.

 

If your business doesn't have enough money, don't worry. Identify the need and the root cause of the problem. Identify possible solutions. Plan and develop your solution. Implement and test it. And keep an eye oin it in the future - don't just think you've solved the problem once and for all.

 

Contact us

Email results@businessacademy.nz

 

Skype PhilANZ

 

Phone 04 920 0911

 

P.O. Box 30-545, Lower Hutt 5040

Click here to learn to improve the long-term profability of your business

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