You need to love and be in love with your business for it to thrive, and survive into the future.
I'm sure when you started out, you were super excited, passionate about it, loved what you were doing. That's why you started, right?
After you've been in business for a little while are you still jumping out of bed with the same enthusiasm?
Probably not as after a little while reality kicks in.
The reality of having enough money to pay the bills. The reality of the hours you need to put in to make it work.
In order for a business to succeed you have to love your business, and you need to learn to love your numbers too. Because the numbers are everywhere.
Whether it's the number of clients or customers you have, the number of sales you make each week, the number of prospects in the pipeline, the number of team you employ. There are numbers everywhere.
Not to mention the revenue you make in a week. The gross margin and gross margin percentage. How much you spend each month and how much you owe and is owed to you.
What you may find after a period of time in business, that the numbers stuff starts to weigh you down.
The excitement phase is over and you feel less excited about your business.
For many small businesses in Australia, January is often a really tough month.
First of all, everyone is on holidays. So those invoices you issued in December haven't been paid because there's no one there to pay them!. Fingers crossed you'll get some money in February.
January is also slow on the sales front which means February becomes a problem too because you don't have any January sales receipts coming through.
In understanding your numbers, you'll get a sense of clarity about your business. That clarity will give you a sense of peace and understanding and will lift a weight off your shoulders.
What if I don't have enough money to pay the wages or the rent?
What if I don't have enough money to pay the bills on time?
What if, what if, what if!
And it's all negative.
If you're keeping a tight eye on your number, you know what's coming up. It's in the knowing that you can make the best decisions.
A cash flow forecast looks at what's coming up. What's coming into the bank account and the bills that have to be paid.
When you've got a cash flow forecast you can start to take action.
You can start talking to suppliers about delaying payment if you need to do that. You can start thinking about chasing money in from your customers and clients that are overdue.
One of the reasons businesses have cash flow problems is because they don't have a buffer.
An ideal buffer is six months of expenses.
That includes loan repayments, lease or hire purchase, expenses and taxes. Everything you have to pay out every month including wages to yourself, or drawings if you're a sole trader.
Six months of that sitting in your bank account as a buffer is ideal. Even if you can get three months it's great.
Try and build up one month, and then build up a second month and then try and build up to the third month. You may never get to six, that's OK, but at least try and aim to build up a cash flow buffer to give you some peace of mind.
When I'm working with clients and we deal with the cash flow problem, they sit up taller. They feel like they can do it again, and they start to get back that enthusiasm that had been lost.