In this post, I am going to show you how to make more money.
Shortfall
Does it feel like you desperately need to find £10,000 or £100,000 by the end of the month? If you are like me, you’ve got invoices and people to pay and no matter how much you plan, you fall short of cash sometimes.
It happens to all of us, to some more often than others.
Or maybe you need £100,000 more this month to reach your revenue goal for the year?
Too Simple?
This might sound really simple, and it might even sound like there’s a huge catch. But there isn’t. If you want to generate X cash for your business, you need to make a sale, or collect money from your customer.
But, instead of doing what most businesses do (we’ll get to that massive mistake), you’re going to do something else. Something easy, and simple and cheap.
Why Xero, or Sage or Quickbooks or even your Accountant cannot help you with this shortfall?
Accounting Software exists to help you produce your P&L and Balance sheet. You input data and you create your financial reports. These are designed to meet your statutory requirements, not to help you run your business and certainly not to help you generate more cash.
Why is it that you cannot use these reports to run your business?
Because A) the data is historic B) you do not have the means to turn this data into meaningful information you can use to run your business. You need analytics to give you the information.
Some software allows you to do projections, and these projections are not really accurate. They are based on ‘guessing’ and ‘a gut feel’. And you need meaningful information you could use right now to make SMART money decisions and strategic projections that will be accurate and based on facts.
As a CEO, you make decisions every day – decisions that either make or spend money. These decisions affect your cash, the cash you see at the end of the year, or the end of the month. Some of this cash is stuck in your business and some is with your customers and some is with your customers to be.
Stop patching up the problem
Here’s what most CEOs do. If they need to make more money for the month or for the year: they start introducing new deals.
These new deals are just amplifying the money issues they are already facing. Here’s why.
Let’s say you are facing a £10,000 shortfall of cash. Most CEOs will immediately think of a new deal or new product they could build to make up for this, or lend money from their personal savings.
This is the core of the problem. The shortage of cash does not get resolved. It just gets patched up until it reveals its ugly face again next month or next quarter, with even greater intensity. When really, the one thing they need to do is to discover what is causing the shortage first, and fix that before starting to introduce more sales deals.
The reason why you should fix the money shortage problem first, is because when you grow your sales, this problem just gets bigger.
Get the right information
Here’s where things become unattractive. I’ve just told you that if you make the right decisions, you will make more money.
So why don’t people make money smart decisions? Lack of analytics.
Most CEOs do not correlate their daily decisions to the amount of cash they are making or wasting. Did you know that businesses waste a lot of money on covering management mistakes?
There is a level of comfort in not knowing, even when you know that there is a big chance in getting it wrong. For some, the comfort is in not having to change anything.
Even if they are desperate for clarity in uncertain situation, they will avoid using analytics. They just make the decision and hope it is right. Their excuse is: I am not an accountant. Or this is how we do things over here.
Fear of numbers
CEOs hate being told that they are wrong. Their excuse is, I do not really like numbers and I cannot be bothered with analytics.
You do not need to get it wrong so many times to then start getting it right! And you do not need to be an Accountant or a finance person to make smart money decisions in your business.
Most successful CEOs do not have financial background, but they have access to the right information to navigate their decision making in uncertainty. They get the right information from analytics, see where the issues are and then use clever strategies to rectify this problem.
Would you like to make more money?
If you need to cover your shortfall of cash, you should sell more or collect faster. This is your starting point. The rest of your money making opportunities will depend on your business model and your terms of trading.
If you are in a services industry your biggest opportunities for making money will be in your delivery cycle and collections. Increasing price is also a good way to make more money and if your gross profit is strong, then selling more will bring really good results.
Businesses in all other industries should pay attention to their gross margin. Increasing prices always gives quickest cash results, but volume can sometimes eat your cash, so be mindful of this.
So before you start to scale up, you need to fix your money shortage. Find the source of this problem and fix it. If you start to grow before you fix this shortage of money issue, you will amplify the problem even further.
Factoring companies know this and they take advantage of your lack of understanding of this simple principle.
Why the hell….
“What can I use to get the right information to make my smart decisions? Because I do not really like excel and I cannot be bothered to use yet another tool. “
Using excels or other tools is not your problem. Readiness is your problem. Readiness to make more money. Until you are ready to allow more money to come to you, you will not receive it. There are not enough excuses in this world you could come up with not to use analytics. You want more money, you are clear that you want more money, but your habit of thought is what is tripping you up.
My job used to be collecting debt from customers. And because I was really good at it, I kept being promoted to all areas of the businesses where money was being generated – the workflow. I was making a lot of money for the business, actual cash in the bank, and when I was asked what my secret was……
My secret to generating more cash flow
I was called into a meeting with the owner and the MD of this firm I was employed by. I did not know what this was all about….but they were eagerly waiting to hear what my secret was to generating so much cash in the business.
They have never seen the firm being so profitable and they have never seen so much cash growing so fast. I said “I do not know, there is no secret, as such. The reason why I am making so much profit and cash in the business is because I focus on what drives these 2 numbers. I look at the how cash flows and I know which buttons to press that will move both, cash and profit”.
After that, I was called by the MD of the sister company for a meeting. She also wanted to know what my secret was, as she had never seen cash rise so rapidly.
I really understood the business – how it operated, what made most money, how to sweat the assets etc, etc. And then every decision I made was focused on shifting the drivers of cash and profit. I used analytics to tell me where I was, so I could make corrections faster.
I shared this secret with so many people and yet not many have been able to grasp the simple method I was using.
Now it is your opportunity to make more money in your business. That’s honestly as complicated as it gets. What is the one move you could do to either increase your price, or sell more, or reduce your costs, or collect faster or deliver faster? That’s where you need to start.
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