Do you have enough fuel for growth?

 Gross sales could be considered the vanity number for businesses. When you make that big sale, capture that record-breaking client relationship, the accompanying euphoria can be addictive. That's not the number that really matters, though. What matters is the volume of cash that flows through to the bottom line. Cash is the fuel for your growth.

A big sale at a 15% gross margin might not be as valuable to your business as is a smaller sale from which you score 40%. Some businesses fall for the lure of the big ticket transaction only to find that they have scored the sale by cutting margins too far. They have the top line victory but difficulty covering direct costs, much less overhead. 

The disappearing margin scenario is also not taking timing into account. Your business likely has to lay out the cash to market and produce your product or service days, weeks, or even months before you are paid by your customer. And some customers - wise to the strategy of conserving cash - might stretch the terms of your invoice. One big ticket client that is slow to pay can wreak havoc on your bank balance.

Cash drought strangles your business. When you're growing fast you need more cash - for your sales and marketing efforts,  for materials, and potentially more payroll dollars to meet client needs on a timely basis.

Do you have the desire for significant, sustainable growth? If so, your situation calls for an examination of your entire cash cycle: marketing, production, delivery, and invoicing and collection. Each of these phases can contain opportunities to save cash, speed up processes and reduce waste, and simplify steps to prevent errors and rework. When cash is flowing faster, you're creating oxygen. When you have ample cash, you have options.

Once you evaluate your cash cycle, you might even wind up changing your business model as Costco did. Early in the years of warehouse stores, Costco was the first among its peers to implement a membership model. When you paid $75 per year to join you could have access to the store and its bargains. The $75 membership fee wound up contributing 75% of Costco's profitability and paid for the company's expansion of stores. Costco's membership model was so transformational that now other similar stores have followed suit.

Your situation might not require a change in business model like the one Costco made. So let's go small for a moment. If you make a power of 1 change in one or more strategic areas, you can find cash to fuel growth. What if you were to raise prices by 1%? How much more cash would you have? What if you were to reduce your administrative costs by 1%? What if you were to be able to collect on invoices 1 day faster?  None of these changes sound earth-shattering, right? So do the math. You might surprise yourself. You might already have the fuel you need, hidden in your company as you're reading this.

ProActive Leadership coaches can guide you through an assessment of your cash position, and enable you to spot your closest opportunities to pour more fuel on your growth goals. Contact us for a complimentary strategy session.