We’ve all been there: those lean times when cash flow is low, expenses keep flooding in and you are completely confused about how you got in this position – and how to get out. Or you have 25 theories as to how it happened, which is just as confusing. Either way, it’s easy to get lost in the twisting path of broken cash flow.
I was talking with a business owner recently. He had previously shared with me that his cash flow had been horrible for the past three months, and he confirmed that this month was looking like more of the same. Then he immediately switched topics to talk about his “urgent” issue of needing new CRM software. The next 15 minutes was a tug of war ? I kept digging into why cash flow had dramatically tanked, and he kept shifting back to new CRM software.
Finally I blew the whistle. Time out!
If your cash flow is broken, EVERYTHING is broken!
What do I mean? Well, you can focus all day long on improving and perfecting systems, processes, training, software, that new website or whatever you choose to distract yourself with, but it’s all still broken if there isn’t any cash flow to sustain your business. Nothing works without cash flow.
If you don’t have a plan to turn your cash flow problems around immediately, your CRM software won’t amount to a hill of beans. You won’t have any employees to use it, and your doors will be closed for business. Cash flow problems have to be at the top of the action list.
We see this ALL the time. It’s seductive to distract ourselves with the concerns of needing systems, new software, having to clean up old files etc., instead of looking at the ugly, real truth of cash flow concerns. Not only is cash flow scary, but how to fix it is often a big question mark. I mean, if you knew how to fix it, you wouldn’t have the problem. So it’s much less overwhelming to focus on things you know how to fix, even though they won’t stop the quickly approaching payroll you need cash for.
When you have a cash flow problem, addressing it must be your top priority – and it should possibly be the only thing on your priority list. Does that mean the other things aren’t important? Of course not. But it means they won’t matter and can’t function properly until your cash flow problem is solved.
The obvious result of chronic negative cash flow is that at some point, sooner rather than later, it will put you out of business. Here are some other important effects cash flow problems can have on your business:
- They cause you to make bad decisions everywhere. When you are stressed about cash flow, everything becomes more stressful. You tend to react out of fear and panic because they are already present in your mind, which never leads to good decision-making.
- You have a scarcity mentality. When you are fearful because cash flow is low, it’s difficult to avoid falling into a scarcity frame of mind.
- Your employees get really nervous and lose confidence. No matter whether you fully share your finances or not, employees can usually tell when cash flow is low. I mean, they can count new clients. When cash flow is low and they don’t see a plan in place to address it, they ask themselves the obvious question: “Am I getting laid off soon?” This is distracting and harms their performance, and it may send them job searching – not because they don’t want to work for you, but because they are worried about how to feed their families. When they see no plan in place to address cash flow problems, that’s a scary unknown that’s out of their control, and the only way they can plan for that is to have an employment backup option. (I can’t tell you how many team members email me to ask if I know of anyone hiring, because they “love their boss” but think he’s going out of business.)
So please, if your cash flow is broken, make it your No. 1 take-action priority. Your CRM, employees, processes, software and systems will be there waiting. If you don’t address it … they probably won’t be.
The first tool you need to address your cash flow problem is a true breakdown of your revenue process. (Assuming that the problem is that revenue is down, not solely that expenses are up.) We talk more about this in our next post, “The First Step to Solving a Cash Flow Crisis.”
If you need help determining how to fix your cash flow problems, call us for a Business Strategy Session. In this one-hour session, for $69, we can help you make heads and tails of your cash flow crisis and determine where to begin to take action.