Cash flow truly is the lifeblood of your business. You can survive without profits if you have cash flow. On the other hand, you can have profits, and without cash flow, you still go out of business.
A mentor once told me to make sure I always have access to cash. Why? Opportunities come up, and you don't want to miss them. You also want to make sure you always have everything covered. If you have debt, see what you can do, to get rid of it. The principal payments are sucking out cash flow, and hurting your balance sheet. Unless that debt was incurred, to acquire an asset that produces more revenue, than what you're paying in interest, and deducting in depreciation, then it isn't helping you. You can see that point illustrated in Project Time Tracking and Billing Software and Your Financial Statement Analysis Strategies.
I am now of the belief that they real key to success with any business is based on two important ingredients: planning and focus.
- What do you want to accomplish?
- How will you get there?
- How will you stay focused on achieving that goal on a daily basis?
I've found that expenses are generally easy to control. It's the revenue that we trip over. We're overly optimistic about how much business we'll bring in, and we're not paying close enough attention to that. In short, we spend too much time managing expenses, and not enough time managing revenues.
Look at it this way. Ask yourself how much you want to gross this year. Divide that number by the number of clients you want to take on. Then divide the result by 12. That's your monthly revenue target. Now divide that by 30. That's your daily target. Put that number somewhere prominent. Make sure it's one of the first things you look at every day. Keep it up, so that all day long you keep coming back to that number. How much money came in today? Have you hit your target yet? I don't care what you invoiced, I only care what you've actually received. That's your measure. That's cash flow, not revenue. See the difference?
Having that goal right in front of you all day will help you focus. It puts things into perspective. If you are on the clock, then anything you are doing at the moment should be furthering that goal. If it isn't, time to re-direct your focus onto your goal. It's that simple. I've seen this process get people from $10K per month to $25K per month, just from this along.
But here's another important dynamic. You want to make sure that your customers stay with you for a very long time. Your customers can be your most powerful sales force when they are recommending you to their friends and colleagues.
Picture this. Your client is at some networking event, and all they can talk about is you and what an amazing service you offer. They can't help it because they can't believe how much value you're adding. They can't even figure out how you do it. You must never sleep.
It's time to stop value pricing your services and start value adding your services.
What can you do to improve your clients lives so profoundly that they couldn't imagine working with anyone else?