Cash flow is one of the main obstacles to growing your business.
We’re familiar with the phrase “cash is king” for a reason.
With cash, you hold the power to take your business to the next level. Payroll isn’t a problem. Marketing becomes more intentional. Decisions are made based on what’s actually best for business (not just what you can afford).
Cash flow is probably the biggest challenge for small business owners — but it’s not the biggest challenge for all business owners. Some owners have grown their business from “small” into extremely profitable companies.
One way they’ve done this is by generating cash flow.
How do you get to the point in your business where cash can be king and cash flow is no longer a problem? From my experience, improving your cash flow starts with these two essential mindset shifts.
1. Expect Payment From All Clients
Setting the expectation that you’ll get paid for your work is one of the best ways to increase cash flow. Yet, small businesses are often too afraid of upsetting the relationship with their clients to ask for the money they’ve earned.
Don’t fear your clients, and be confident in your service. If you operate from a position of fear, your business can get into financial trouble quickly, and here’s what can happen:
You’re afraid your clients won’t do business with you anymore if you force the issue of payment. Because of this fear, you give your clients more and more time to pay until you’re behind on your cash flow. Now, you can’t keep up with payroll, much less the extra expenses needed to grow your company.
There’s a different way to operate and a different mindset that will help you change this downward spiral: Expect to get paid — on time.
Then, put processes in place that disassociate you from your relationship with the client and getting paid. It’s natural for salespeople to avoid collecting from their clients. That’s hard! Salespeople built a relationship with the client and don’t want to make it uncomfortable. That’s reasonable.
So, have another way to collect. Create a customer-friendly institution within your organization that collects so that you get paid and keep the relationship on positive terms.
2. Aim For More Than Making Payroll
Cash flow isn’t just about making payroll each month. Payroll is the bare minimum goal of cash flow.
When there’s more cash flow, you give your company room to really grow. Think bigger. Aim for more profit than you need to pay the bills.
With ample cash flow, you can make decisions without having to justify it to the bank. You’re no longer reliant on your line of credit to move forward. You can allocate marketing dollars to reach new clients. You can keep working on projects when business is slow.
With cash flow, you gain the power to be attractive to your clients and highly responsive to great opportunities.
Sometimes, your Profit and Loss statement may say you can afford something, but your cash says you can’t. P&L and cash flow are two very different things.
Good cash flow frees you up to make great business decisions, not weak decisions that come from the “I don’t think I can afford that right now” mindset. When you generate extra cash, you’ll be able to make those decisions confidently.
How To Tell if You Have A Cash Flow Problem
If you’re making money, but you don’t know where it’s going, you have a cash flow problem.
We can fix this.
Cash flow may be the biggest issue small business owners face, but it’s also one of the easiest issues to resolve. If cash flow is a problem for you, admit it. Then start making these two mental shifts to see improvement.
If you can fix your cash flow problem now, you’ll be able to do great things later.