Cash flow crisis hits most small businesses at sometime in its life. This time of the financial year money issues hits small businesses the most, but actions can be taken to assist with cash flow management.
1) Provide a customer the invoice immediately upon delivery of goods or services.
If you wait to prepare your invoices monthly than you may be adding as many as 30 extra days to your cash flow conversion. The goods have gone, the service actioned but you have not been paid. Who is fitting that bill?
2) Offer customers a discount for paying on the day they receive the goods or service.
3) If your service is going to take some time, request a work in progress payment where the customer pays a certain percentage of the total invoice up front before the job begins. You do not want to be out of pocket for expenses.
4) Track your past due accounts and actively call customers to collect overdue payments. Set up a system to send out statements and letters to the customers explaining the steps that will be taken if the account remains unpaid. This may include percentage penalties or transfer to a collection agency.
It is important to monitor your cash flow and shorten the flow conversion so you can bring money into the business quicker. A cash flow gap occurs when the cash flowing into your business doesn’t keep up with the cash flowing out. We all know that cash can flow out of the business quickly with all sorts of expenses from materials to permits and wages.
Quote: “The best things in life are free but you can tell me 'bout the birds and bees. Now gimme money”—The Beatles
Friday, April 29, 2011
Monday, April 18, 2011
Crunching out the numbers, the cost of the campaign and customer.
We all have our preferred way of building up our businesses with new clients/customers, and as much as we want free business as much as possible, there is a cost involved with lead generation.
In my industry the best way to grow your business is via referrals but this will only build the business to a certain point. Marketing needs to take place to promote and call in new business. But at what cost? How much does each customer cost? Do you know?
Purchasing Customers – which one would you like?
All the customers have different price tags as all have come to you via a different method, maybe flyers, radio or local paper.
But how much did your campaign cost?
The best way to work out your cost is to look first at your static costs, these are the costs that stay the same, they consist of the expenses accumulated with doing a quote.
For example:
Brochure: $0.40
Petrol for quote: $2.50
Quoter/Staff: $20.00
Static Cost $22.90
Next look at the lead generation cost, this is the total expense for a particular marketing campaign.
In this example we are placing an advertisement in the local paper for $350.
Lets say we had 10 quotes from the campaign with 7 new customers.
Our price per customer is:
Static cost x #of quotes + lead generation costs/new customers
Our example brings this to:
$22.90 x 10 = $229 +$350 = $579/7 =$82.70
Our new customer has cost: $82.70 this is the purchase price per customer.
In the repeat business industry like I’m in, we can than work out the breakeven time frames by dividing the purchase price per customer by the average clean profit.
For an example lets base this on a $25 profit per clean. In this case if the customer was a fortnightly customer it will take 6 weeks until you hit break even timeframe. (3 cleans)
$82.70 / $25 = $3.3
Always monitor your campaigns, know your numbers and recognise what needs to change to bring the numbers down. This could be the marketing method, conversion rates or static costs.
Quote: ‘Make measurable progress in reasonable time. ‘ by Jim Rohn
In my industry the best way to grow your business is via referrals but this will only build the business to a certain point. Marketing needs to take place to promote and call in new business. But at what cost? How much does each customer cost? Do you know?
Purchasing Customers – which one would you like?
All the customers have different price tags as all have come to you via a different method, maybe flyers, radio or local paper.
But how much did your campaign cost?
The best way to work out your cost is to look first at your static costs, these are the costs that stay the same, they consist of the expenses accumulated with doing a quote.
For example:
Brochure: $0.40
Petrol for quote: $2.50
Quoter/Staff: $20.00
Static Cost $22.90
Next look at the lead generation cost, this is the total expense for a particular marketing campaign.
In this example we are placing an advertisement in the local paper for $350.
Lets say we had 10 quotes from the campaign with 7 new customers.
Our price per customer is:
Static cost x #of quotes + lead generation costs/new customers
Our example brings this to:
$22.90 x 10 = $229 +$350 = $579/7 =$82.70
Our new customer has cost: $82.70 this is the purchase price per customer.
In the repeat business industry like I’m in, we can than work out the breakeven time frames by dividing the purchase price per customer by the average clean profit.
For an example lets base this on a $25 profit per clean. In this case if the customer was a fortnightly customer it will take 6 weeks until you hit break even timeframe. (3 cleans)
$82.70 / $25 = $3.3
Always monitor your campaigns, know your numbers and recognise what needs to change to bring the numbers down. This could be the marketing method, conversion rates or static costs.
Quote: ‘Make measurable progress in reasonable time. ‘ by Jim Rohn
Sunday, April 10, 2011
Thinking Positive
There are days when I feel so close yet so far as I grow my business.
On these days when I listen to my inner voice, am I listening to the correct little voice.
We all have inner voices guiding us with our daily lives, the little invisible friend who is whispering in our ear. Some of our self talk is uplifting but sometimes it is the ‘Little Voice’ that holds us back. It is negative.
It is time for me to take control of my inner voice, refocus and continue to grow my business in this changing environment.
This week has been about focus. Realigning the goals and putting affirmations into place that can be repeated when doubt sets in. I’m pushing away the little negative voice and making room for the positive invisible friend.
In some cases a negative inner voice is actually a vocalization of low self-esteem. You may have received some negative feedback or economy is not working in your favour and your inner voice starts putting negative thoughts into your brain. It is possible to take back the reigns and continue stepping forward towards your goals.
Think positively: Think of the good services you provide and the positive feedback.
Realign the goals: You may need to realign the goals and change the deadlines but by looking back at your future goals you can put the plan back in place to move on and grow.
Acceptance: Accept that there will be setbacks, failures, mistakes and shortcomings than use these to learn from and move forward.
Support team: Speak to your mentors and support team, accept their listening ears and weigh up their advice, as this is your business.
Quote: ‘“A human being's first responsibility is to shake hands with himself.” Henry Winkler
On these days when I listen to my inner voice, am I listening to the correct little voice.
We all have inner voices guiding us with our daily lives, the little invisible friend who is whispering in our ear. Some of our self talk is uplifting but sometimes it is the ‘Little Voice’ that holds us back. It is negative.
It is time for me to take control of my inner voice, refocus and continue to grow my business in this changing environment.
This week has been about focus. Realigning the goals and putting affirmations into place that can be repeated when doubt sets in. I’m pushing away the little negative voice and making room for the positive invisible friend.
In some cases a negative inner voice is actually a vocalization of low self-esteem. You may have received some negative feedback or economy is not working in your favour and your inner voice starts putting negative thoughts into your brain. It is possible to take back the reigns and continue stepping forward towards your goals.
Think positively: Think of the good services you provide and the positive feedback.
Realign the goals: You may need to realign the goals and change the deadlines but by looking back at your future goals you can put the plan back in place to move on and grow.
Acceptance: Accept that there will be setbacks, failures, mistakes and shortcomings than use these to learn from and move forward.
Support team: Speak to your mentors and support team, accept their listening ears and weigh up their advice, as this is your business.
Quote: ‘“A human being's first responsibility is to shake hands with himself.” Henry Winkler
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