How to Increase Your Cash Power
CASH = OPPORTUNITY
Having extra cash on hand allows you to do some pretty essential things in your business, like:
- Purchase equipment
- Hire employees
- Maintain inventory
- Conduct market research
- Innovate and improve your products and services
- Attract new customers
- Open new locations
- Have a hedge against unexpected economic or market changes
So, why is it that when it comes time to seize these opportunities - when the excitement to grow is stirring within you - that it can feel like such a struggle to find the cash to do so?
The truth is that many business owners don't plan ahead specifically for their cash needs.
CASH = VALUE
When you have an accurate vision for where your business is heading, and what you need to do to get it there, then cash becomes a tool by which you can create a better experience – or provide more value – for your customers.
CASH = VALUE = MORE CASH
You already know it takes a certain amount of cash just to get through the day, but it is that 'extra' cash that you build up through careful planning and strategic thinking that funds the steps you need to take in order to move your business to the next level.
If you are going to grow your business, then you must learn to manage your cash carefully and strategically in pursuit of your vision.
Two Starting Questions
There are two questions I ask every new client and you should be asking yourself as well:
"What do you want to accomplish and how committed are you to actually doing it?"
These questions are critical, not just as they relate to cash management, but because they define the essence of your discipline in whatever venture you're considering: losing weight, reducing debt, buying a new house, improving your golf game, learning a new language, or creating a successful business.
You have to know why you're pursuing any given goal to begin with. What is the value that you will get from the end result? Is it worth the discipline it takes to get there? Usually it is.
Then you have to admit that if you've attempted it before, but haven't made much headway toward achieving your goal, it might require some serious soul-searching to understand where the problem lies.
You may find that it requires you to take a new approach, as uncomfortable as that may be...
You need to own it.
And so it is with cash. Strong cash flow is a goal that most business owners have, and sincerely aim to achieve, only to look back and realize that they're in the same place as they've always been.
You might have to ask yourself how you personally relate to cash. How do you manage it? How do you mismanage it? What are your goals in acquiring and using it?
Once you've defined your goals and recognize where change needs to happen, you can begin to see how to properly leverage your cash to get more of what you want.
Who's Minding the Store?
How you relate to cash is largely determined by which of your business personalities has been dominating your thinking. Your inner Technician, Manager, and Entrepreneur all relate to cash in different ways.
Your inner Entrepreneur knows there will be exciting opportunities in the future that you'll want to take advantage of and that you'll need a cash cushion that will give you the available funds to do so.
Your inner Manager needs to be able to generate profit. This is the person who implements the steps to ensure that you can track and monitor your cash flow and have a plan in place for using cash productively. You may not be, and in most cases should not be, the person who actually does the cash planning and reporting work, but you need to be coordinating and guiding those activities. The ultimate accountability for making sure that work gets done rests with you as the Manager.
For the inner Technician, cash is simply what you get in exchange for a certain amount of time and material. It is short-term, immediate, and easily taken for granted. Your inner Technician does not have the capability to think strategically about cash. If your inner Technician has been minding the store, it is not surprising if your cash is used indiscriminately, with little awareness or interest in the actual strategic power it holds.
It shouldn't surprise you that, in my experience, those clients who have the greatest challenge in harnessing their cash power are those who have allowed their inner Technicians to be the guardians of the cash; whether it is to their accountant or bookkeeper, they have abdicated and conveniently ignored the critical part that their inner Manager and Entrepreneur must play in fueling their vision.
This is not an insurmountable challenge by any means. It simply underlines the need to commit to a change of perspective and a shift in power.
Power Shift
Every successful small business runs like a high performance machine and it takes cold, liquid cash to fuel it.
As you seek out new opportunities to drive your company growth, consider the following guidelines about cash flow management that can help you take charge of your business and your future – note which of the three business personalities apply:
- Answer the first two critical questions: What goals do you have for your business and how committed are you to actually making them a reality? (The Entrepreneur)
- Plan out how you might use any extra cash to improve your business. Have fun - make a list of things you want to see implemented. (Manager and Entrepreneur)
- Decide if the benefit of these improvements is worth the discipline it will require to get you there. (The Entrepreneur)
- Then, if you are in fact committed to achieving greater cash power, plan how you might generate, budget for, and save up the extra cash you need. (Manager)
- Be continually questioning how you relate to cash and be always willing to visit new ways of thinking. (Manager and Entrepreneur)
No comments:
Post a Comment