Jump-Start Profit Tip of the Week: Cash is King!

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King The storm clouds are on the horizon! Multiple times in the last month business owners have complained to me that sales have dropped in the last two to three months. There are a multitude of reasons that I would point to. The main ones:

  • The consumers are nervous and not buying.
  • Higher inflation in gas, food and clothing is limiting funds available for non-essentials. Seniors & veterans, in their third year without as cost of livings increase, are really feeling the pinch of this inflation
  • Continued high unemployment. Don’t believe the 9% number! When you count those who have given up looking, those who are working less than 40 hours, or those who have had to take a job at a much lower pay than what they were used to working (the “under-employed”) the rate is closer to 18%-20%.
  • Smaller employers, burdened with increased audits and regulation and uncertain about future tax rates and the regulatory burdens of ObamaCare, are delaying expansion and hiring plans.
  • Reduced government spending as states and local governments are forced to cut their budgets.
  • Large Federal deficit spending that is sucking credit out of the market. This is making it almost impossible for both the consumer and the business owner to get the credit needed to kick-start the economy with spending.

So what should the small business owner do? Prepare for the storm now of course! The smart business owner should immediately buckle down and get back to basics. This means:

  • Run your business by the numbers. Profits and cash are the only measure of how successful your business is.
  • So, you must run accurate cash based profit and loss weekly. If it is accurate – fix it! If you don’t know how pay to have your CPA fix it.
  • Focus on cash flow and cut expenses NOW! If survival is on the line – be brutal about the cuts. You cannot afford any sacred cows.
  • Collect on your receivables. You must get the profits into the bank. Review your policies and require upfront deposits and payment upon delivery. Remember – Cash is King.
  • Run lean! Keep your inventory as low as possible. Work with your suppliers to get product only when absolutely needed.
  • Control payroll costs! Get rid of any deadwood. Cut every employee’s hours by 4-8 hours per week. Make sure they understand that you are doing this to save the company and to make sure they all have a job during this hard time. When an employee quits – don’t replace them right away. See if the work can be spread around or what can be eliminated without hurting customer service and the quality of your product or service.
  • Increase marketing and sales efforts. Focusing on sales is the easiest way to grow your business during good times and sustain it during the bad times.
  • Work harder. As the owner of the business you have the most to lose if your business fails. So, get back to work. Come in early, leave later, work weekends and forget the golf for awhile. Set the tone that this is an emergency.
  • Don’t panic. You have a plan and the will to survive and thrive. So, let the country have a recession (or whatever the politicians want to call it this time) just decide not to participate!

Thank you for your continued support and let’s make this year are most profitable year ever.

P.S. Call me if you need help putting together a profit improvement plan.