February 28, 2023
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There is no secret recipe to business success.
Each successful enterprise takes a unique vision, uncompromised effort, and just a small bit of luck to make it a reality.
Unfortunately, you may check all of these boxes (maybe not so much the luck part) but still find your company in choppy waters.
Which, once again, demonstrates why the secret formula is a unicorn.
With that said, take heart. Even if the magic potion for business success does not exist, there are some tried-and-true best practices that many fledgling companies have used to regain their footing. Keep reading as we explore some practical steps for restoring your business to stability and growth.
“There are lies, damned lies, and statistics.”
Commonly attributed to Mark Twain, this axiom encapsulates the danger of standing behind specific numbers as representative of a broader condition.
Business leaders would do well to take note. There are countless figures that can mislead decision makers into thinking their company is on a firm footing.
“We had a record number of sales last month.” (May imply that sales will continue to be strong when it was just a one-off).
“The market is growing at X% year over year.” (May elicit an urge to pour money into marketing haphazardly in an attempt to gain market share).
This is not to say that all numbers are fool’s gold. Rather, it’s important to take them with a grain of salt. Know which really matters.
To this effect, nearly every business consultant and turnaround coach will agree on one point: the statement of cash flows is king when it comes to measuring business health.
Is your business creating more cash than it’s burning? If so, the business’s future prospects are strong. If not? There is work to be done.
If you’re wondering how to solve cash flow problems in a business, you’re not alone. Despite the general understanding that positive cash flows are paramount to business health, many companies struggle to stay in the black. Some tried-and-true steps for overcoming cash flow issues include:
Turning around cash flows is about discipline. It doesn’t take a miracle to stop burning cash. Rather, tighter fiscal policies and trimming the fat on the behaviours that caused the cash crunch in the first place.
When looking at the points for a cash-flow turnaround, you may realise that there is a lot to fix.
Don’t be daunted.
Improvement starts with understanding. You know the issues. Now address them.
Make your objectives SMART (specific, measurable, achievable, relevant, time-bound).
It’s not enough to say “I need to reduce accounts receivable.”
Instead, say “I need to reduce accounts receivable from [X] to [Y] by [WHEN].
Craft these objectives on a short, medium, and long-term basis. It will keep you accountable at every stage of the process.
A turnaround will undoubtedly spur change.
Changes in processes. Changes in staffing. Changes in capital allocation.
It can be unsettling for everyone involved.
Therefore, it is crucial to communicate proactively with your team. Be transparent with the “why.”
If your team does not understand, if they are not bought in, even the most strategic turnaround plans will fail. You can’t recuperate your business alone. It’s an “all hands on deck” situation.
This may go against the grain.
Especially since the power of AI is extolled at every corner of the business world these days and automation is the answer to lowering costs on redundant administrative tasks.
By all means, carefully weigh how technology may help streamline processes. Deploy it as it makes sense.
However, also remember that many software suites, AI subscriptions, and other such technological products that promise to immediately improve your business’s profitability often fall into the luxury spending category that contributes to cash flow issues. That’s right: some 46% of all SaaS licenses go unused in a given month, adding up to approximately $21 million each year in wasted money for businesses.
When on a turnaround deadline, avoid the allure of the “next big thing” and focus on technology that improves your day-to-day operations as they currently exist. Place a major emphasis on communications. Namely, any software that limits the need for meetings. Whether in-person or remote, meetings eat into so much of a workday that could otherwise be used productively. Platforms such as Slack (day-to-day communications) and Asana (project updates) are wonderful for quickly and effectively keeping your team on the same page without usurping hours of their day in redundant (pointless) meetings.
There is no magic formula to business success. Even the most stalwart concerns can run into trouble that quickly puts their solvency into doubt. But don’t despair. By meticulous attention to the small details listed above, you can give your business the best chance of quickly getting back on the path to profitable growth. For more of the latest trends in business and entrepreneurship, explore the content at Robin Waite for additional thought leadership!
Author Bio:
Sam Willis is a freelance writer who loves sharing his knowledge and expertise in engineering, construction, and business. He lives in Atlanta, Georgia, where he enjoys spending time with his wife and family in his free time. Sam’s work as a freelance writer can be found on Building Product Advisor, a construction industry resource site.
Your statement of cash flows is the most critical indicator. You need to know if your business is generating more cash than it is using. A positive cash flow is the ultimate measure of business health and is essential for a successful turnaround.
Structure your goals using the SMART framework. This means making them Specific, Measurable, Achievable, Relevant, and Time-bound. This approach turns vague intentions into a concrete action plan with clear accountability at every stage.
A turnaround brings significant change, which can create uncertainty for your staff. Communicating openly and transparently about the 'why' behind your decisions is crucial for getting their support. Without your team's buy-in, even the best strategies are likely to fail.
You should be very cautious. Many new tech subscriptions fall into the category of luxury spending that can worsen cash flow problems. Focus on eliminating waste from unused software and only adopt tools that solve immediate operational needs, especially those that improve communication without adding unnecessary costs.
Start by immediately assessing your cash situation. Then, tighten your accounts receivable processes to get paid faster, restructure payables where possible, and eliminate all non-essential spending. Securing short-term financing might also be necessary to provide a buffer.
