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- Jan 11, 2014
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I recently helped someone via PM that is dealing with some cash flow issues in their business. They're at the point where they have grown at an unprecedented rate and ran out of capital far sooner than they expected. They took out some debt and have since used it all up; now this person is in the position where he needs to expand, but the fruits of his labor aren't due for another 1-3 months. He has a full pipeline of leads that he doesn't want to lose and wanted to know how he could fix this short-term issue.
The above is just one situation. However, my answer for this situation can apply to whatever scenario for which you have cash flow issues. Whether it's money to pay employees, money for advertising, money for buying out a competitor, the same principles will apply.
My advice was to get creative, think outside the box, and create a reality where all the stakeholders are happy.
What I recommended for this specific instance was the following....
He currently is working with around ten clients with an average revenue per client of about $3-4K/month. A few of them are in the same industry for the same geographical location. So I told him, why not create an initiative within his agency which centers around working with one client per year at a considerable discount and building their business. Aside from the long-term case study benefits the client also gets one year of exclusivity knowing that the agency will only be working with them in that marketplace.
Instead of $4K/month, the client would pay $20-25K upfront for the entire year which comes out to a savings of $23-28K for the client. The contractor has already been working with these clients for 1-2 months and provided a stellar service with excellent results, so his clients already know the upside of the deal. It's a no-brainer.
Let's look at the stakeholders and see who's happy in this scenario:
Agency Owner - He has fixed his cash flow issue and is now leading his business with revenue, not debt.
Client - The one client will be happy because they just got a HUGE discount AND there now your exclusive clients for that industry and/or geography.
Employees - The employees are happy because the business owner is better able to grow the business meaning more job security and the ability to provide for their families.
Creditors - Creditors are happy because the business owner is now able to pat that debt off faster because of increased revenue due to growth.
It's a win, win, win, win.
I am posting this because many people are limited by cash flow issues, but the ones who come out on top are the ones who get creative to fix them.
Do you need to purchase X to double your businesses production but you don't have the money upfront? Think about your suppliers. Sometimes if you send up to $2X, XXX+ in business every year, then I'm sure they would love to see your business double. That means if X costs $10,000 you could go to your supplier and say, "Listen, we're going to find a way to get X and when we do our business is going to double in size. We might even need to start looking for suppliers who can give us a better rate with the increased volume. However, for (INSERT PRICE $5K-10K) we will sell you the right to be our exclusive supplier for the next two years."
Let's look at the stakeholders and see who's happy in this scenario:
Business Owner - He has fixed his cash flow issue and was able to purchase X for little to no money down.
Supplier - The supplier is happy because they are buying money at a discount. They're spending $5K-10K to make an extra $2X, XXX+ per year for the next two years.
Customers - The customers are happy because a bigger business might mean better offerings or new products.
Employees - The employees are happy because the business owner is better able to grow the business meaning more job security and the ability to provide for their families.
Everyone is happy, and everyone wins.
If you found this post helpful or you have your own scenarios you'd like me to think about, drop me a message down below.
The above is just one situation. However, my answer for this situation can apply to whatever scenario for which you have cash flow issues. Whether it's money to pay employees, money for advertising, money for buying out a competitor, the same principles will apply.
My advice was to get creative, think outside the box, and create a reality where all the stakeholders are happy.
What I recommended for this specific instance was the following....
He currently is working with around ten clients with an average revenue per client of about $3-4K/month. A few of them are in the same industry for the same geographical location. So I told him, why not create an initiative within his agency which centers around working with one client per year at a considerable discount and building their business. Aside from the long-term case study benefits the client also gets one year of exclusivity knowing that the agency will only be working with them in that marketplace.
Instead of $4K/month, the client would pay $20-25K upfront for the entire year which comes out to a savings of $23-28K for the client. The contractor has already been working with these clients for 1-2 months and provided a stellar service with excellent results, so his clients already know the upside of the deal. It's a no-brainer.
Let's look at the stakeholders and see who's happy in this scenario:
Agency Owner - He has fixed his cash flow issue and is now leading his business with revenue, not debt.
Client - The one client will be happy because they just got a HUGE discount AND there now your exclusive clients for that industry and/or geography.
Employees - The employees are happy because the business owner is better able to grow the business meaning more job security and the ability to provide for their families.
Creditors - Creditors are happy because the business owner is now able to pat that debt off faster because of increased revenue due to growth.
It's a win, win, win, win.
I am posting this because many people are limited by cash flow issues, but the ones who come out on top are the ones who get creative to fix them.
Do you need to purchase X to double your businesses production but you don't have the money upfront? Think about your suppliers. Sometimes if you send up to $2X, XXX+ in business every year, then I'm sure they would love to see your business double. That means if X costs $10,000 you could go to your supplier and say, "Listen, we're going to find a way to get X and when we do our business is going to double in size. We might even need to start looking for suppliers who can give us a better rate with the increased volume. However, for (INSERT PRICE $5K-10K) we will sell you the right to be our exclusive supplier for the next two years."
Let's look at the stakeholders and see who's happy in this scenario:
Business Owner - He has fixed his cash flow issue and was able to purchase X for little to no money down.
Supplier - The supplier is happy because they are buying money at a discount. They're spending $5K-10K to make an extra $2X, XXX+ per year for the next two years.
Customers - The customers are happy because a bigger business might mean better offerings or new products.
Employees - The employees are happy because the business owner is better able to grow the business meaning more job security and the ability to provide for their families.
Everyone is happy, and everyone wins.
If you found this post helpful or you have your own scenarios you'd like me to think about, drop me a message down below.
