Which cash lever will you pull? | Issue #157
Why The ‘Power Of One’ Is The Best Tool To Fix Cash Flow In Your Business
Did you know that a 1% adjustment on three levers in your business could increase your net profit by 19%? Yes – you read that correctly. 19%! Just think of the effect this could have on cash flow in your business. It could be the difference between surviving and thriving in the aftermath of COVID.
Cash flow problems are an epidemic in themselves. The last year has been incredibly challenging. Many companies have experienced substantial revenue loss from being shut down for weeks or even months. The businesses that have thrived are those with a ready supply of cash. This has acted as a buffer and allowed for lucrative pivots as the market changes.
And it’s not over yet. As we emerge, bruised and battered from a brutal cycle of lockdowns, we’re seeing a tangible sense of nervousness in our clients. People think there’s a fragility to the recovery. This is compounded by increasing difficulty hiring staff. Salaries are increasing and it’s hitting cash flow at precisely the worst time. Don’t bury your head in the sand and hope it will improve. It won’t. Inflated salaries are here to stay. So, you need to find other ways of increasing cash flow to maintain your pre-pandemic margins.
In last week’s blog, we took a deep dive into the flow of cash through a company, exploring ideas and methods for improvement. But here, I’d like to introduce you to a nifty tool that every company should use. It will tell you what approach to take and which levers to pull. It’s called the ‘Power Of One’.
Solving The World’s Consumer Goods Distribution Problem with Justin Floyd
If you’ve ever suffered with your supply chain, then don’t miss Justin Floyd, founder and CEO of RedCloud, the startup looking to solve the distribution problem for B2B merchants and consumers outside of the Western world.
They’ve already run a trial in Argentina, and put an e-commerce or a digital distribution platform, trading platform and finance platform in the hands of physical stores in Southeast Asia, South America and Africa.
This is a truly fascinating conversation about Justin’s product and the problem they’re trying to solve. Because some of the parallels they’re tackling are currently challenging the UK, namely, tracking qualitative, consumer data.
Justin’s got an incredible track record: 25 years of building technology startups, he spent some time in Silicon Valley and some time in Cambridge. He’s run companies, he’s built companies, he’s sold companies, he’s invested in companies. All of which makes for a fascinating conversation.
“The world that I operate in, it’s got a product distribution problem. I mean, last year, there were just under $2 trillion worth of products that weren’t available in store for customers who wanted to buy them, because there is such little ability to be able to successfully distribute at scale.”
We really enjoyed it, we hope you do too.
Tired of wondering where your next lead will come from? What if you had a reliable, and predictable, source of new potential customers coming into your sales funnel each month? This is Predictable Prospecting and here I’ll show you how some of the best sales leaders in the industry are creating consistent, and measurable procedures to bring in fresh, qualified leads to their sales funnels each and every month.
Confession: I’m a productivity nerd. I take time management very seriously. I read voraciously on the subject, seek out skilled friends for advice, and have taken online courses to master the latest tactics. To-do lists give me a sense of real satisfaction. On days when all my tasks are complete, I feel like a champion. I adore my planner so much, I have considered taking our relationship to the next level by investing in a bullet journal. (Sadly, I haven’t done that yet.)
I recently had the doubtful pleasure of self-administering a mail-order Covid test. It was a process that required simultaneously mastering the test itself, packing up the sample, and registering the procedure online. This administrative, logistical and medical triathlon would have been challenging at any time, much like applying for a driving licence while assembling an Ikea chair, parts of which I had to insert into various orifices.
The pandemic has accelerated a trend that has been unfolding over the last decade. As the world has grown more digital and complex, the range of decisions that leaders need to make has broadened, spanning from big picture strategic thinking to careful execution, to advancing technology roadmaps and upskilling and engaging employees. And decision-making criteria too have expanded, increasingly focusing on ESG considerations in addition to narrowly defined profit expectations. The past year has been particularly intense, pushing leaders to make decisions for which they had no previous experience — and do so quickly.
The lifeblood of your business is repeat customers. But customers can be fickle, markets shift and competitors are ruthless. So how do you ensure a steady flow of business? The secret – no matter what industry you’re in – is finding and keeping automatic customers. These days virtually anything you need can come through a subscription. Far beyond Spotify and Netflix, companies in nearly any industry, from home contractors to florists, can build subscriptions into their business. Subscription is the key to increasing cash flow, igniting growth and boosting the value of your company. Whether you want to transform your entire business into a recurring revenue engine or just pick up an extra 5 per cent of sales growth, The Automatic Customer will be your secret weapon.
Author of cult classics The Pumpkin Plan and The Toilet Paper Entrepreneur offers a simple, counterintuitive cash management solution that will help small businesses break out of the doom spiral and achieve instant profitability. Conventional accounting uses the logical (albeit, flawed) formula: Sales – Expenses = Profit. The problem is, businesses are run by humans, and humans aren’t always logical. Serial entrepreneur Mike Michalowicz has developed a behavioral approach to accounting to flip the formula: Sales – Profit = Expenses. Just as the most effective weight loss strategy is to limit portions by using smaller plates, Michalowicz shows that by taking profit first and apportioning only what remains for expenses, entrepreneurs will transform their businesses from cash-eating monsters to profitable cash cows.
MEANINGFUL ACTION FOR MONDAY
Reduce your collaboration overload
If you’re a business leader of any type, you need to be spending half to a full day a week thinking. Just thinking and nothing else. Remember, strategy is next year’s profit. Reduce the time you spend in meetings and, instead, prioritise this time. Put it in your diary and then turn off all distractions to make sure you’re not interrupted. Sit with a notepad and pen and no sensory input for an hour. Then write down what comes into your head. You’ll be amazed by the ideas that come to you during this time.
Conducted in The New Forest, away from the uproar of the everyday commercial world, the Scaling Up Made Simple Workshop is presented by Scaling Up Coach, Dominic Monkhouse to allow you the mental space to look at your business afresh – to recognise your strengths, your weaknesses and your opportunities. The workshop is your first step in the process of identifying and addressing the real challenges confronting your business. You will receive practical guidance in the essential skills that underpin manageable growth.
Quote of the week
“If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you need to have a prayer session before raising the price by 10%, you’ve got a terrible business”Warren Buffett
Dominic offers business coaching and management development, strategy planning and organisational change, using tried and tested methods to launch your organisation onto an unparalleled growth trajectory. His programme is a function of his broad experience, his deep expertise and a proven process used by over 2,700 firms worldwide.