Business owners face two types of problems: Not having enough customers or having too many customers. While the latter seems like a dream scenario for most, the situation can quickly deteriorate if measures are not put in place to handle the increased demand or counter-measures applied in case of a drop in demand. In both cases, the customer will experience cash-flow problems. While it is relatively apparent how one can have issues when there are not enough customers, it is not as evident to many how a surging demand for business and services can create a cash difficulty that could potentially result in their company’s downfall.
In this article, we discuss three bulletproof strategies for sustaining and maintaining a thriving business that withstands the growth and decline cycles.
Strategy #1: Build a War Chest
Viable businesses have the appropriate cash-flow to manage the day to day operations but may not have adequate cash reserves to invest in future business growth. In many cases businesses pay their employees and contract staff in advance of when they receive payment from end-use customers; this results in a negative cash-flow situation where the company will have to bridge the financing. Having adequate cash reserves (what I like to call a ‘war chest’) will enable businesses to hire more staff or contractors without scrambling for bridge financing. One of the more extreme examples is that of a business owner client of mine that had to pay contract staff 30 days after the invoicing but had to wait over 60 days to collect payment from the end-user; he resolved the issue by providing bridge financing from his personal funds. Not having an adequate cash reserve – or a proper ‘war chest’ – is accepting the notion that you cannot afford to grow your own business.
Strategy #2: Establish a Scalable Business Model
When businesses face an upward demand, business owners scramble to catch up and will usually fall into the trap of paying less attention to the longer-term impact of their immediate demand needs. One example is that of a client of mine that hired a few contract staff to fill the sudden increase in demand in her health clinic. Two of the contract staff she hired enjoyed a full-time caseload from the health clinic and were in danger of being viewed as “full-time employees” by the federal tax agency resulting in a potential tax liability to the business. Building a scalable model means establishing a solid foundation upon which companies can pivot to meet rising demand without having to make critical decisions under pressure. The first step to achieve a scalable business growth strategy is to establish an appropriate employee-contract staff mix. A starting point to determine this mix is to review the company’s historical demand profile and determine the number of full-time staff needed to meet the lowest demand; use this as a guide to establish the number of full-time employees your business needs. Then determine what additional staffing the business needs to meet the anticipated peak demand; use this as a guide to secure contract staff resources. Applying a prudent employee-contract staff mix is key to building the first step to developing a scalable business strategy. Employees represent fixed operating costs which should be more than necessary to cover the expenses associated with minimal demand scenario. Contract staff become variable expenses and are deployed when demand increases (in which case sales revenues more than offset associated costs).
Strategy #3: Nurture the Most Important Business Asset
The relationship between productivity and psychophysiological coherence eludes many business owners and senior executives. Pychophysiological coherence is created by feeling positive emotions. Individuals experiencing happiness, gratitude and appreciation will trigger the biological mechanisms that will lead to improved health, enhanced intelligence and memory recall as well as an emboldened resilience to stress and anxiety. There are many approaches to enhance an individual’s psychophysiological coherence and doing so is a powerful enabler of personal and professional breakthroughs. One of the more profound experiences demonstrating the sheer power of psychophysiological coherence is that of my client who went from a six-figure net income loss to projecting a seven-figure net-income in less than one year after learning powerful coherence building techniques.
The three bulletproof strategies for nurturing a thriving business are ensuring adequate cash reserves to buffer against the cyclical nature of customer demand, having a prudent approach to staffing and establishing a culture of psychophysiological coherence within an organization.