Enviable Business Success … and Then What
The road to success is filled with challenges for all companies. But it does start feeling like less of a struggle and hustle:
- there is more flow,
- the sales pipeline starts filling and producing a consistent increase in revenue,
- the marketing is delivering brand awareness and visits,
- the team is working well together and creating a good company culture,
- the rework rates reduce, ….
Then …. Wham!
You suddenly realize facts don’t seem to be “adding up”.
The profit, or loss, and the cash remain stubbornly flat. Maybe even getting worse.
Sales have increased well.
So why is there not more cash and profit? Where is the cash hiding and how do you get more?
The answer … has the company entered, or is it teetering on the brink of, Success Quicksand?
What is Success Quicksand?
- It is a nasty little pit that catches the unwary; especially when there is a large change in business.
- It spoils celebrations and fun by dragging cash into working capital or assets, and profits into higher expenses.
- As the company sees increased sales it has to order more supplies, or pay expenses in advance of the customer paying their invoices – there is a period when your cash is at risk because you have paid your suppliers and staff before your customers have paid you.
- If not stopped, the unfortunate consequence is a business that struggles and descends further into the quicksand. It struggles to pay staff salaries or supplier invoices.
- It may eventually disappear or require significant rescue activity in order to survive. It can return to firmer ground and regain operating strength, but it is hard work.
The best way to avoid the quicksand is to get some simple tools in place.
- Monitor where cash is going.
- Set up early warning that comprehensively indicates what is happening in cash impact in all areas of the business.
- Negotiate with suppliers to match your payment terms more closely with your customers’ payments.
- Establish your sales terms to create a cash advantage for your company – collect a deposit on signature, payments in advance of shipment, earlier payment advantages, etc.
- Negotiate for supplies held on consignment or only delivered to your company “just-in-time”.
Success Quicksand lies waiting for every business but does not have to be a trap. It can be avoided and acting on the warnings is often a competitive advantage.
Don’t succumb to the quicksand of success! Do not let reality interfere with your dream!
If you would like to discuss tools you could use to avoid Quicksand of Success, or share your experience avoiding or escaping your own business difficulty reach out here.