I mentioned last week that our cash flows were heading in the wrong direction.
At Monday’s management meeting Bonnie presented me with an up to date “mother of all spreadsheets” (MOAS – that’s what we call it), showing a £50,000 deficit in cash flow before 31st December 2006.
Given that one of my principle goals for 2006 is to finish the year business debt-free, this is not good news.
How has it happened?
- Sales Year To Date (YTD) are lower than expected (January to April – New Dental Contract Angst, April to June – New Dental Contract panic, June to August – sod it – the sun’s out, let’s have a BBQ);
- Expenses YTD to higher than expected – largely because I have invested in Team CB and in systems.
As I keep saying – a 14-year old could run the cash flows – it’s not rocket science.
So my weekend was overshadowed by a small dose of Fantasy Expressed As Reality (FEAR) – imagining that the company would go broke and I’d be busking through the winter months outside a local cinema with a banjo and a dog with three legs. Actually, I could borrow my mother’s cat – it has three legs and is called “tripod” – that would get the sympathy vote.
Monday arrives and I default into my crisis management mode:
- Identify the problem – we are short of cash;
- Quantify the problem – we are short of £50,000 on these planning assumptions;
- Identify the solution – increase prices? No. Increase sales? Yes. Reduce expenses? Yes. Increase services? Yes.
- Quantify the solution – yesterday we spent the morning looking at cost cutting and deferring non-essential expenditure – that saved me £20,000 in about 2 hours. Some tough decisions but necessary. In the afternoon we worked through our prospective new client (PNC) list and identified the best use of Paul’s time in the next 6 weeks. I have a call-in day today but during the rest of this week I will be discussing with Team CB the provision of additional events, products and services to increase our sales by £30,000 before the year end.
By the end of the meeting the FEAR had been eliminated and we are busy focusing on a PLAN of action to rectify the situation – before it becomes a problem.
I wish more of my clients were so diligent in their financial management.
Maybe I am so diligent because I went bust in 1993 and vowed it would never happen again.
I also know it’s not just me – a client of mine went off on holiday last weekend after reporting profits of £19,000 in July, against a target of £50,000. The reason? Sales were down. No doubt he will be sat on a beach right now, planning his return – that’s what we entreprenuers do you know.
Anyone who owns a small business knows that it’s a roller coaster ride and, in the words of one of my first sales managers, Barry Woolley:
You will spend 10% of your time elated, 10% of your time suicidal and the other 80% either too busy or too tired to know how you feel. When you are elated, celebrate, when you are suicidal, make sure you have an inner-circle of team members and advisors who can guide you through.”
Activity is the key – take action – now!
I love my MOAS, I love my Team and I love my circle of advisors – without them I would spend my whole life in FEAR.