Cashflow Tips – When growth can be a disaster for a business if not handled well

Cashflow Tips – When growth can be a disaster for a business if not handled well
Cashflow Tips – When growth can be a disaster for a business if not handled well

The main result business owners desire is that growth will solve most business problems. But growth can also be a disaster for a business if not handled well – and here are some common miss-beliefs.

1.     Build it and it will sell itself – Many new ideas come to entrepreneurs all the time – but not everything succeeds for outside and internal reasons – no real demand, lack or poorly-prepared marketing plan (often a weak spot for small business owners), lack of financial budget plan

2.     I can/will do it all – Common to fall into the “if it’s to be done no-one does as well as I do it” trap. Yes in the early days you have to do most yourself – but document the method that you find works best, then teach someone else to do it so you can move on to other things. A good explanation is found in “The E Myth” by Michael Gerber. Paint a clear picture of what the future business will look like/become, write out the Organisation chart of the key roles of the organisation and job descriptions, find/create the systems required to make the business efficient, and get employment/HR help a sit is a whole new mine-field of managing people and financial responsibility!

3.     Bigger is better When owners work on business growth, they often focus on sales, but a look at industry benchmarks often reveals that businesses in higher sales brackets aren’t always the most profitable.  Often, businesses with modest turnover can achieve better profits, where-as too often, as a business grows, overheads can get out of hand and the extra sales get eaten up and profit falls.  So sales and marketing plans are very important – and testing and measuring as you go is paramount – set budgets and create reports at least monthly to track how you are going.

4.     Growth solves Cashflow problems Nothing just happens without careful measuring and managing carefully!!! Ensure the budget is created as already mentioned, know your margins (Gross Profit, Net Profit as minimum). See if there are supplier discounts with larger purchasing volumes, and importantly, if you sell on account instead of retail, keep monitoring debtor days and don’t get slack on customers taking their time to pay!

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3 thoughts on “Cashflow Tips – When growth can be a disaster for a business if not handled well

    1. Thank you Sarina – you have some great info on your blog too!
      What is not to get excited about accounts and bookkeeping? (some will vomit…!!)

      Liked by 1 person

      1. Ha. Yes not everyone’s cup of tea 🙂


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