Well event season started again this week with the first of our September events in Cardiff which went very well and a good time had by all. It was clear from many of the conversations I had or overheard that things are really tough out there for small businesses at the moment which I know is an incredibly obvious observation to make but it makes me sad and I want to write about it!
Most people start a business because of necessity (Can’t find a job) or out of deep desire to be masters of their own destiny. Many people self fund their start-up and commonly choose a business which fits one of the following descriptions;
- Its what they have always done, only now its for themselves and not their previous employer!
- License or Franchise – probably financed by their mortgage or redundancy package!
- Inspired by a passion – They have always wanted to be a photographer/artist/trader/designer etc
- A new idea – A product? A service? An internet resource?
Whatever your reason and motivation for starting a business, one thing is clear very early on, it is hard work. Especially when you realise that business doesn’t just get handed to you on a silver platter, you have to go out there and hustle for it.
Most small business owners are great at what they do, that doesn’t necessarily mean they are great at selling it. Hiring sales people is always a challenge to get right. Especially if you are not one yourself, so how do you take the first leap?
The number one cause of stress our members seem to be facing at the moment is CASHFLOW. Everyone seems to be late paying, from blue chip to one man band. People are spending too much time robbing Peter to pay Paul, constantly juggling finances & they are not focusing on where their new business is going to come from.
I personally think this recession has had a far deeper impact than people realise, the amount of requests we are receiving at Business Scene to remove details from the site because the company is no longer trading is upsetting as you know the heartache that goes with it.
I mean lets face it, never in a month of Sundays would you describe running your own business as easy would you? It is more stressful, you never switch off & work all hours. Don’t get me wrong, there are many positives and I personally wouldn’t have it any other way, but it is hard work.
So here are some tips to ease cashflow burdens and help with stress. Please feel free to add more to the comments below, really the more the merrier.
Factoring
1) Consider Factoring your Invoices
Factoring is simply a financial transaction whereby a business sells its invoices (Accounts receivable) to a third party like a bank, or companies like Bibby Financial Services. They do so at a discount in exchange for immediate cashflow. This is different from a loan because factoring is not about credit worthiness, but the value of your receivables which is essentially a financial asset which you are selling.
If you have a large amount in outstanding invoices at the moment and the lack of cashflow is crippling you, this will be a very good option.
2) Renegotiate & reduce your overheads
I know several businesses that have done just this recently, gone back to their landlord etc and agreed a new deal. There are business premises across the UK with landlords doing deals to stop them sitting empty and to ensure someone else is paying the rates.
Similarly, consider looking at the various companies offering savings on utilities by switching your accounts. There are several well established ones out there with a representative at most networking events across the UK. Have a chat, or alternatively read site like Motley Fool or Money Supermarket for the latest advice.
3) Be more disciplined with your selling time.
I went on a sales course once and the best advice I learned was to make 5 sales related calls a day more than you do right now. 5 calls a day (Assuming that is not your full time job) equals 100 more a month, even with low conversion rates should win you more clients. The advice continued, make the calls before 9, or after 5. Typically it is easier to get through to decision makers as the gatekeepers haven’t arrived or have gone home.
If you don’t know who to call or need more data, seriously take a look at our Premium membership on Business Scene which incorporates the marketing propeller. There are two offers of free data on there to get you started.
4) Join Prompt Payer
OK I declare Prompt Payer are one of our national partners, but that is because they are bloody good at what they do which is help their members get paid on time. Research has shown that displaying their logo on your invoice will get you paid on average 21 days quicker.
There is a membership fee to join but this is also free as part of Business Scene membership. I’m not pushing…Just saying!
5) Exercise
This is one that works for me, if I feel stress or am overwhelmed by an issue, I run. Stress is the second most commonly reported work related illness according to the Health and Safety Executive. But the worst fact is that most people don’t report stress and small business owners can do nothing but manage it because we don’t have the luxury of phoning in sick if things need doing.
Stress needs managing, whatever exercise you like doing, recognise when you are stressed and do it! Look after yourselves people!
That’s enough from me, I want to hear your tips and advice. Remember the theme, how to ease cashflow issues and manage the preassure of running your own business in this tough climate.
Please re-tweet and share also, you never know who might take one nugget of advice and it makes a difference.
Keep well
About Warren
All good points, well made. The important thing is to keep the foot on the gas. Make that extra call, knock on the extra door, exchange that extra business card. Swap an extra evening networking event for Coronation Street and an extra breakfast meeting for an hour with your pillow. It’s a cliché but it’s true, When the going gets tough, the tough get going. Good luck to all.
PS My tip for your next event. Talk to somebody you have never talked to before not the guy you are sharing a a ride home with after the event. You are not umbilical to the chapter director. Speak to the new guy in the corner who MIGHT just appreciate your handshake.
Steve Hall recently posted..Welcome to This Is Spain
I agree Steve, tenacity is key. Even when you feel the gods are against you, dig in!
Thanks for that honest post. You seem a very positive guy, but we can’t always be positive, we have to be realistic. You are out and about far more than me no doubt but i see and hear the same thing. this is the new reality, it’s vital to keep a tight reign on any business and watch the overheads and cashflow like a hawk. All anyone can do is to try and stay ahead of the game.
David Swede recently posted..Hello world!
Hi David, Thanks for commenting. I’m not always positive because life throws its curve balls. Believe me I wrote this based on conversations last night about the experiences of a business owner which I fully relate to. It was almost a reminder for what I need to be doing right now…. Going for a run in the morning
Make chasing the cash a formal part of your business. I was doing a training session with 12 business owners last week on understanding business financials and when it came to cash flow the majority agreed that they could do more to actively chase overdue payments. They felt that getting the sale was more important but after spending time showing them how the cash flow cycle works they quickly understood its importance.
If you operate a small business then invariably you have a close relationship with your clients and you may feel awkward about chasing outstanding debtors. It’s your money, they’ve bought the product or service and as long as your T&Cs are clear there should be no embarrassment about chasing what is yours.
If you can’t get payment within a reasonable time scale get someone else to chase it; a different voice can help and sends a message to the debtor that you are serious. If all else fails, hand it over as quickly as possible to a debt collection agency. I recommend Steve White of Thornbury Collections (well know within Business Scene – http://www.thornburycollections.co.uk )
It’s all about systematising the process – lay down set days for when chaser calls/letters are sent; create a Credit Policy which documents your approach to cash flow and debt management.
Poor cash flow is the greatest killer for all businesses – pro-actively manage it.
Rob recently posted..‘Loan Sharp’ Goes Global!
Thanks Rob, I agree Steve White is first class and one of the most genuine, helpful people I have met networking.
Great advice to make chasing payment part of the process!
Warren,
An inspired post, full of practical advice, aptly timed. I agree with all of your suggestions: factoring, reducing overheads such as those for leasing and rent, belonging to an organization who will pursue your debtors, but I think that it takes more than exercise to manage stress – indeed for some it may just hype them up!
The reason for this is that stress is a specific psychobiological condition. Stress is similar to a challenge response except that it includes abnormally large secretions of Adrenocorticotropic Hormone (ACTH).
According to the psychologist Ernest L Rossi, who in turn refers to the pioneering work of Candice Pert, (neurobiology), and Milton Erickson, (hypnosis), many people can change their responses to stress simply by reframing ‘stress’ as ‘challenges’.
Whilst this may seem easier said than done, it really comes down to attitude. You’re right when you assert: ‘Most people go into business out of necessity’. For some, however, business is a way of life and if you’re going to be in business then, I submit, that must be your attitude.
When you see business as a way of life you never waver, even when God seems to be against you, because every setback is seen as a challenge, rather than a stressor. As I write elsewhere successful businesses market aggressively and use advertising as a means to solve business challenges.
Those with a business attitude will take heed of your post and act upon your suggestions. Those without it will probably develop ulcers, have coronaries, get divorced, or just fail to take action providing no reason, and eventually cease trading.
Thank you for this,
Stephen
Stephen Bray recently posted..Reflections on the ‘Trees and Sky Exhibition’, Marmaris 28th May ~ 10th June, 2010.
A brilliant response Stephen and a useful idea to re-frame stress!
Mindset really is the one thing that separates success from failure, I will head your words as I feel an ulcer coming on!!
Thanks Warren – fine blog and good points..
Things are undoubtedly tough & we are all aware that doing nothing is not an option. Remaining passive can only worsen the situation.
These are a few of my thoughts on perhaps how to stabilise and grow your business…:
Make a move when you see an opportunity:
If you see a competitor may in trouble or you can offer a product at a better rate or have a useful USP – move in, raise awarenesss, promote, advertise and attack…
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Rid your business of any ideas or products that may have outlived their usefulness (and are indeed no longer remunerative):
Tougher times demand that your finite resources – time, money, ideas – should be concentrated on potentially the most beneficial areas ‘’for you & your biz’’.
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Focus your efforts on helping your clients succeed too:
We all depend on our clients of course (especially the good/fast-paying customers) but why not give ‘em something extra… for nothing.
Dream up ways to help your clients too and, believe me, that advice will engender, in return, both loyalty & decent referrals.
Your generosity of spirit (not always chargeable) may not achieve financial results for you today, but, when the economy and the business arena improves – as it must – will almost certainly leave you with loyal customers & a healthier business…
Norman
Thanks Norman for your kind comments and your contribution.
I love the idea to get rid off the obsolete and unprofitable and quite agree, now is the time to go above and beyond with you clients.
Excellent article and really glad you enjoyed my Business Scene event at Cardiff! (Not long now untill the Swansea Connections one!!)
Don’t forget folks there is loads of good and free advice out there. I would be delighted in assisting you with any cashflow problems you may be having, so feel free to drop my a line for a no obligation, no pressure talk about how I can help your cash flow cycle.
Steve
Hard to argue with anything you’ve said here but I wonder if you’ve not missed out the obvious tool as well… clients who pay in advance get a discount. We might loose out on, say, 10% of our fees, but at least we don’t have to chase it. In terms of our time, that more than pays for itself!
S