Imagine buying a new state-of-the-art motor car with an incredibly powerful engine, excellent acceleration, smooth handling and a stunning interior. You get into the car for the first time and you are enjoying the comfortable, powerful ride; then you look down at the dashboard and there is nothing to help you understand the car’s performance and fuel reserves. No speedometer, odometer or fuel gauge. Without these critical instruments to give you feedback on the car’s performance, you will never get maximum benefit and enjoyment from the vehicle. You will be constantly worried about running out of petrol, concerned that you may be breaking the speed limit and wondering when to take the car in for a service.
Driving a powerful new car without instruments to give you feedback on its performance can be equated to setting up a promising new business and not measuring and reporting back on its performance. Too many business owners find themselves in this position. At best they have a handle on one or two metrics such as revenues, unit sales or usage. At worst they have absolutely no idea how their business is performing and they just hope that the bank doesn’t call to say they have run out of money. The astute businessperson thrives on feedback and information about the performance of all aspects of their business. They use real numbers, comments and metrics to drive their decisions and they openly discuss the performance of the business with all those involved in making it work.
The process of using business performance metrics to understand and respond to what is happening in your business is imperative. You measure, report, adjust then measure, report, adjust again and the cycle is ongoing.
As you keep going through this cycle the business goes through a process of ongoing improvement as a result of deliberate effort. Without metrics, ongoing improvement can only occur as a result of chance. Creating this sort of discipline early on in the lifecycle of the business is relatively simple. The metrics and measures for new businesses are not overly complex. Measuring what is important in a more mature business can create a little more of a challenge but it is certainly not impossible. The principle is to start as early as possible and make measurement and accountability part of the culture of the organisation. Remember: what you measure is what you get.
The Principles Of Good Business Performance Measurement
Having been involved in the development and implementation of business performance measurement systems for a range of different businesses over the years, I have discovered a set of overriding principles that tend to apply regardless of industry or size. As you go about devising or revising the metrics that you use to measure your businesses success, I would recommend that you consider these principles and integrate them into your performance measurement system:
Accountants often wonder why so few people in smaller businesses pay attention to the information they produce. One of the primary reasons is that people don’t understand it. Accounting rules are complex and this makes it difficult to make accounting information understandable and useable for the normal person. If you want to get people to buy into a measurement system then keep it simple. You want employees to speak about the performance of the business in the passage and over their morning coffee. They will only do this if measures are clear and simple.
- Focus on a few important metrics rather than providing people with an overload of information
- Explain the metrics and the mechanics behind each of the important metrics to everyone in the organisation
- As the business grows, inform new employees what these metrics are and what they mean
- Try to make the language of your important metrics part of the organisational DNA. For example, any Kulula.com employee talks quite comfortably about “load factors” (number of people on each flight relative to the flight capacity) and “turnaround times” (time from the offload of passengers to when the airline leaves the bay full of new passengers, luggage and fuel)
The traditional approach was to make almost all the metrics financial. This addressed symptoms and overlooked the real causes of problems or successes. A business is an interrelated set of activities creating a fairly complex system and one needs to try to measure the performance of the whole system, not just its financial output. Two Harvard Business School professors by the names of Kaplan and Norton proposed that to really understand the interrelated activities that make up a business, we should look at what they called a balanced scorecard measuring four areas of activity:
- People – how motivated and skilled are our people for the work they are doing and how are they performing in their designated roles?
- Process – how efficient and effective are our
- Customers – how happy are our customers?
- Finances – how are we doing financially?
- An effective performance measurement system will measure performance in all four of these areas.
- Devise a balanced set of measures that take into account all the important elements of the business
The old way to run a business was to withhold information from people, empowering only a few with the information. Luckily this is no longer the case and progressive companies have realised that sharing results with everyone involved in achieving the results is a productive activity. If you want to maximise the benefit of measuring the performance of your business, be open about the results. People can only act on the information that they have and if your employees have an idea of how the company is performing they can do what is necessary to improve things. As a follow on, it is good practice to discuss the results, particularly with senior people. This enables you, the owner/manager to draw on the consolidated intelligence of everyone in the organisation to interpret the results and take corrective action. Different people have different roles and therefore different views of what is going on in the organisation. Sharing of their insights and understanding of results enables cross-functional or inter-departmental learning and provides the owner/manager with an opportunity to understand what is really happening in the business.
- Share business results with employees as regularly as possible – at least quarterly
- Ask people for their interpretation of the results. Interpret the good and bad results with the people in the organisation.
Accountability and Rewards
Too often I have come across organisations that measure the performance of different aspects of their business and then do nothing with the results. They avoid addressing the problem areas and neglect to reward those responsible for outstanding performance. I once had a mentor who said that the most important lesson in business is to be “tough on results and easy on people”. If there are problem areas get explanations for poor performance and talk straight with the people involved about how the issues can be resolved. Glossing over problems creates uncertainty for the employees involved. Most people prefer to have negative issues out in the open and discussed directly. Similarly, when someone performs well, be sure to give them the recognition and reward they deserve. Winners thrive on recognition. Rewards don’t always need to be financial. Time off, a hand written letter or a congratulatory word in front of others can serve as excellent motivators for those who have done well. A good business is a sustainable system that is continuously rejuvenated and re-energised – rewards keep people motivated and focused on doing the right thing. If you are not going to act on positive and negative results coming out of a performance measurement system, don’t bother with the system at all.
- Deal with poor performance by discussing the results openly and directly with those involved. Focus on the issue, not the person
- Reward good performance by focusing on the person and recognising their contribution
Business Life Cycle
A business is similar to a person growing up and going through distinct life stages. A person goes from birth to childhood to adolescence to adulthood to ageing. The characteristics of each stage are different and transitions from one stage to the next are not always clear when they are happening, but when one looks back years later the different stages are evident. A business goes from idea, start-up and early growth to later growth, maturity and possible decline or re-invention. The length of time for different business stages depends on the industry and the quality of management. An effective business owner needs to be able to adapt as the business goes through progressive stages because the demands and challenges are different at each stage.
The idea stage is characterised by a very small team (many times it is just one or two people) researching, developing an idea, crafting a business plan, raising initial capital and turning the idea into a business. The entrepreneur’s goals in this stage should be to get going with a well researched, viable business model.
The start-up stage is characterised by building trial products or prototypes, expanding the team, putting infrastructure in place, fostering relationships with partners and suppliers and making the initial sales. In the start-up stage the goals focus on building a management team, establishing the business and making sales.
The early growth stage is characterised by an initial uptake of sales of new products or services, heavy demands on a growing team to deliver products or services, lack of clear structure around organisational processes, strains on cash flow to fund sales growth and an energy and excitement that comes with growing a business. In the early growth stage the goals of the owner focus on putting a workforce in place, creating systems to deal with increased workflow, managing cash flow and keeping sales going.
The later growth stage is characterised by continued growth in sales, clearer role definition within a growing team, the establishment of processes and procedures to meet sales demand, more efficient cash flow forecasting and the challenge of trying to reduce costs. The later start-up goals focus on keeping people motivated and incentivised, eradicating unnecessary costs, retaining customers and making profits.
The maturity stage is characterised by the slowing down of sales growth and levelling off of sales, the stabilisation and possible shrinkage of the team, clear definition of process and procedures and striving for process efficiency to eliminate all unnecessary costs and maximise profits. In the maturity stage goals can either focus on getting the most out of the current business before it goes into decline or innovating to launch something new for a new phase of growth.
The decline stage is characterised by declining sales, rationalisation, very well defined but possibly stale processes and procedures, outdated technology and attempts to reinvent the business. If the reinvention works the business may find a new growth curve. If the reinvention does not work, it is likely that the business will die a slow death.
The measures to be considered at the start-up, early growth and later growth stages have been captured in tables throughout this feature. The tables illustrate an example of a balanced scorecard at each stage of the business lifecycle.
Business measurement is not a sexy topic. It is not something that we spend hours chatting about at cocktail parties or something that would be the topic of a best-selling book, but it is something that is critically important for creating business success. It may seem like a “boring” or “conservative” thing to do in your business; you may think that it is far more exciting to chase a big new account or come up with a new advertising campaign but you ignore the concept of business performance measurement at your peril. Without it you are driving blind, and who knows where you might end up.
Business performance metrics enable an entrepreneur to:
1. Better understand the business. To really know whether the business model you have conceived is working, and to understand where money is coming from and going to, you need insight into how all elements of the business are performing.
2. Focus on all elements of the business and keep the business in balance. The trap that most of us fall into is that we (or our accountants) only measure financial results: revenues, costs and profits. We have insight into how the business is doing financially, but we don’t understand what is causing the financial results. A good set of metrics will measure more than financial results and enable the business manager to keep an eye on customer satisfaction, employee performance and process efficiency within the organisation. Getting feedback on a broad set of measures will enable the business owner to understand what really drives profits.
3. Make intelligent business decisions. Making strategic and tactical business decisions without information is a bit like choosing a hotel for an upcoming holiday without ever looking at a picture, brochure or getting feedback from someone who has been there. Without accurate information it is almost impossible to make good business decisions.
4. Motivate themselves and employees. Information and feedback have the uncanny ability to inspire and motivate people in two ways. Firstly, knowing that what we are doing is going to be reported causes us to be more conscientious in actually doing it. It is a natural human condition to want to look good when something that we have contributed to is evaluated. Secondly, when those results are made known, good results can be uplifting and make a team want to do even better the next time, and poor results correctly communicated can inspire the fighting spirit in people to overcome past failures.
5. Reward people appropriately. If you don’t know how the business has performed it becomes very difficult to recognise and reward exceptional performance. One ends up giving blanket rewards to all people in all departments and the good people begin to feel that it is not worth putting in extra effort because there is no reward for good performance. A well constructed business performance measurement system enables the business owner to isolate and reward pockets of exceptional performance, which means you have a much better chance of retaining the exceptional performers.
6. Address problems before they get out of control. Without a business performance measurement system, problems can sneak up on you and you only realise that you have the problem when it is a crisis: the cash has run out, the customers have all gone to a competitor, the key employees have resigned or the system does not have the capacity to meet demand.
Ideas of what to measure at each point in the life stage of a business
|Area||Possible goals||Measures to be considered|
|Area||Possible goals||Measures to be considered|
|Later Stage Growth|
|Area||Possible goals||Measures to be considered|
What To Measure To Make Sure Your Business Won’t Crash And Burn
Let your customers measure success for you and you’ll have a better idea of how to reach your goals.
If you don’t want your business’s spurts of success to end up just a flash in the pan, you need to measure your business progress against your goals. This allows you to adjust your plans for future success accordingly. But how?
Back in the nineties, NASA designed an interplanetary weather satellite to orbit Mars. However, it deviated from its planned trajectory and was destroyed in the atmosphere, simply because of a minor miscalculation; a result of the NASA team and their contractor using different systems of measurement.
By the same token, business owners need to determine what metrics to use to measure their progress, before they can work out what still needs to be adjusted to get them to their ultimate goals. Many businesses know this, but many don’t know they’re doing it wrong.
Connect with your customers
Most organisations use the same key performance indicators such as sales, customer retention, and product quality to track their progress. What’s the problem with this picture? They’re measuring where they are now in relation to where they were before, leaving the question of where they want to be, and how to close the gap, to guesswork.
Why waste time testing one strategy after another when you can find all your answers in one place: With your current and prospective customers? They’ll tell you exactly where to aim and what to do to get there. This is why customer surveys are the proverbial toolkit of business progress tracking.
A customer survey is simply a series of questions that you ask your customers, to gauge their satisfaction, so you can hold on to them and collect ideas about how to improve your business offerings.
There are a number of ways to distribute these surveys, but it’s no surprise that social media is trumping phone calls, text messages and emails as the preferred platform for customers to communicate with businesses and brands.
Engage with your customers
What you choose to ask your customers is entirely dependent on what goals you wish to outline and track. That’s the easy part, but it’s significantly harder to gauge the effectiveness of social media campaigns, because you need to know what to look for. You can measure awareness of your business using metrics including volume, reach, exposure and amplification.
Retweets, comments and replies will tell you how engaging your content is, and you can keep an eye on traffic by tracking URL shares, clicks and conversions. Plus, there is a plethora of additional plug-ins to this from ORM and sentiment tracking tools for deeper analysis of this data.
Related: Does Your Customer Service Care?
The catch is that in the past, businesses had to compete for space — on billboards, in magazines, during ad breaks on TV — but now it’s all about timing. So the first challenge is making sure your social media post questions are being seen by as many of your customers as possible.
On the flip side of the coin, people don’t have to have any previous experience with your brand to interact with you on social media, so another challenge is calculating which of your respondents are actually viable customers.
Leverage your data
You’ll need to tap into the analytics that speak to who your followers are, and then focus on finding ways of channelling them on social media, based on their geographical location and the kind of content they are most likely to consume.
Then test your social media measurements against your key performance indicators. Yes, we’re back where we started, but this time you’ll be armed with what you need to leverage this data, in order to achieve your business goals.
How Do I Go About Valuing My Business?
Francois Otto, Head of Corporate Finance and Jonathan Wernick, Corporate Finance Transactor, Sasfin Capital give advice on how to value a business.
Francois Otto, Head of Corporate Finance and Jonathan Wernick, Corporate Finance Transactor, Sasfin Capital give advice on how to value a business.
If you have ever thought about raising capital for, or selling, your business? Perhaps one of the most difficult questions you have had to ask yourself is “How much can I sell my business for?” Regardless of what anyone tells you, determining the value of your business is a subjective process.
The value of business in one person’s hands can be completely different to another. However, there are a variety of methods to determine the value of a business. Some methods are fairly simple and others are a bit more complex.
Perhaps the simplest method that can used to value your business is to determine its Net Asset Value (“NAV”). This simple method entails subtracting the value of the liabilities from the value of the assets.
Another method that can be used to value a business is to apply a specific multiple to a financial metric. This method is referred to as a comparative valuation or “MULTIPLES” approach. For example, a company’s net profit could be multiplied by a specific number to give you a value of the business.
The number which you multiply the earnings by is referred to as a “Price Earnings” or “PE” multiple. The size of this number will depend on the business in question, for example its growth prospects, its size and the industry in which it operates, just to name a few.
The final approach that can be used to value a business is the discounted cash flow (“DCF”) method. This method adopts the philosophy of “Cash is King”.
Under this method, the business is valued using cash flows that the business is expected to generate. Cash flows can take the form of future dividend payments or, if the business pays a small or even no dividend, cash flows can take the form of profits generated by the business after adjusting for future capex, investments in working capital and taxes payable.
As this method values a business using the cash flows it is expected to generate in the future, a discount needs to be applied to these future cash flows (to reflect the uncertainty thereof), the size of which increases the further out in the future the cash flow occurs. The aggregate value or sum of these discounted cash flows represents the estimated value of the business.
Related: Here’s How To Value Your Business
The three valuation methods (NAV, MULTIPLES or DCF) mentioned above can yield different values for a business and deciding which method to use will often depend on the purpose of the valuation as well as the specific business being valued.
This exercise is normally the first step in raising capital or selling your business, to provide the owners with a sense of value. This value is theoretical until such time as a willing investor agrees to a transaction.
This is where a good adviser will assist the owners, through effectively marketing their business, to optimise the value achieved by the owners with the added benefit of ensuring the terms of a transaction are fair to the owners (e.g. reasonable earn-out conditions and warranties).
How You Can Use Your Creditors To Fund Your Business Growth
Everything you need to know to keep your cash flow positive, use your creditors to fund your business, and make your numbers work for you.
The success of a business is often judged by its rate of growth and its number of employees. The problem is that both a business’s rate of growth and its size come with their own demands and consequences, which are often ignored in the pursuit of more and more growth.
The reality is that not all growth is created equal. If your business doesn’t have scale, you can end up growing yourself into trouble — or even out of business.
Even more important is positive cash flow. Is that great new contract bringing in money, or costing you money? Shouldering an upfront cost for growth down the line is all part of the growth journey, but only if the numbers make sense and you know when your investment will turn to profit.
Here’s the secret to growth: It can be self-funded. Yes, there are venture capitalists, private equity firms, angel investors, bank funding and a host of other ways to access finance — but you can grow a large, successful organisation without any of these.
The trick is to know your numbers. Here’s how you can practically apply the rules of positive cash flow to your business.
The Power of Cash
In 2012, Amazon’s share price was $173. By 2016 this had grown to $725. Walmart, arguably the biggest retailer in the world, went from $59 to $70 in the same period.
But take a look at Table 1 for the revenue growth of both companies between 2003 and 2012 (a trend that has continued).
How can Walmart’s stock price have hardly increased, while Amazon experienced impressive growth over the same period, despite the fact that Walmart’s revenue growth far outstrips Amazon’s (in absolute, not percentage terms)? Is Walmart’s stock undervalued, and Amazon’s overvalued? Even accounting for growth off a low base, how can we explain this?
The share price is simply the net present value of future free cash flows generated from the efficiency of an organisation in managing cash to generate more sales.
In other words, Jeff Bezos’ focus on his cash conversion cycle has meant his business is incredibly cash-positive, which has in turn positively impacted Amazon’s stock price. Although Amazon is a highly unusual business with its negative cash conversion cycle, and its actual liquidity is somewhat contested by the investment community, it’s a great example of getting customers to fund growth.
The Cash Conversion Cycle
We agree that it takes money to make money. A business, even one with a tight, scalable business model, will consume more cash in its growth phase than in its steady state, or execution phase.
But, you don’t want to ever spend more money than you need to — or can reasonably afford to. This is true whether you’re self-funded or spending someone else’s cash, but particularly if you’re funding your own growth. Dealing with unplanned funding can be costly, time-consuming and it hampers growth. It also bogs you down in stressful admin when you could be focused on the elements you love and that excite you.
There are two questions that you should have asked yourself as you embarked on your growth journey (note: if you’ve never asked these questions, you need to surround yourself with like-minded business people who can help you find and ask them):
- For what period of time is my money tied up in inventory and other current assets before customers pay for the end product or services?
- How much cash do I need to finance each unit of sale and what is the amount of cash generated by each unit of sale?
I guarantee you that Jeff Bezos knows the answers to these two questions. Not his accountant or financial director — Jeff himself. You can’t abdicate the numbers of your business to someone else. Understand the difference between delegation and abdication. You don’t need to be doing your business numbers but you absolutely need to know what they are. This is one of the most important metrics of your business.
Let’s go back to our example of Amazon (see Table 2): Bezos’ cash conversion cycle (measured in days), oscillates between -40 and -8 days. That’s the secret.
In other words, Amazon uses other people’s money to fund its operations. That’s an extremely valuable business model, as its share price demonstrates.
Walmart’s cash conversion cycle is also a very respectable 11 days. As a business model it’s not quite as valuable as Amazon’s, but there’s a reason why Walmart is an international leader in its industry. It takes this behemoth organisation just 11 days to convert $1 into something worth more than $1. It then recycles that original $1 a further 35 times per year. Walmart’s margins are not high, but the compound growth is very powerful, as we’ll see later.
Let’s Get Started
Step 1: Understand your business
To better understand the components of your operating cash cycle and your cash conversion cycle, take a look at Diagram 1.
Operating cash cycle (OCC) is the period of time between when you start the assembly of all the required inputs into your production line, and cash comes back into the business as payment for the sale. Remember, if you’re a B2B business, there’ll be a delay between when the customer starts using your product and service, and when payment is made as well. This difference is referred to as accounts receivable days. Likewise the time between when your production starts (having received inventory) and the moment your business pays for this inventory, is the accounts payable days.
Cash conversion cycle (CCC) This is the period of time that working capital is tied up. It’s the time between when cash was converted into one of the inputs for your production line, and when the product is converted back into tangible cash, handed to you when customers pay you in real money. It’s the difference in time between your operating cash cycle and account payable days.
Self-financing growth rate (SFG)
This is the crux of this article. Your SFG rate is the rate at which growth can be sustained by cash generated by your business without any external funding.
Step 2: Working out your cash conversion cycle
Where can you access the figures you need to determine your own OCC, CCC and SFG? First, use data spanning a 12-month time period. This has two advantages: You have a better chance of sourcing accurate data if it comes from a signed off financial statement, and you can dampen the noise caused by seasonality.
Work with your balance sheet and income statement.
Working out conversion days from balance sheet
|Asset||ZAR amount on (000)||Equivalent days||Liabilities||ZAR amount on (000)||Equivalent days|
|Cash||10||Accounts payable||99||Calc A|
|Accounts receivable||384||Cal B||Loan
|Inventory||263||Calc C||Current liabilities||149|
|Current assets||657||Retained earnings||183
|Plant & equipment||25||Capital contributed||350|
|Total assets||682||Total liabilities||682|
Working out conversion days from income statement
|IS line||ZAR amount on (000)||Day equivalent||Ratio|
|Line||ZAR amount on (000)||Day equivalent in (000)||Ratios in %|
|Revenue / Income||2 000||= 2 000/365 = 5 479||100|
|Cost of sales||1 200||= 1 200/365 = 3 288||60|
|Operating expenses||700||= 700/365 = 1 918||35|
|NPBT – net profit before tax||100||5|
Based on the above example and figures, we have determined the following information:
- This business generates R5 479 of income per day at a cost of R3 288 per day.
- Calculation A: We owe a total of R99 000 to our suppliers, which at
R3 288 per day is ~ 30 days from
99 000 / 3 288
- Calculation B: We are owed R384 000 from our customers, which at
R5 479 per day is ~70 days from 384 000 / 5 479
- Calculation C: The amount of inventory we have paid for and need to turn into a sold product in equivalent days is ~ 80 days from 263 000 / 3 288.
Our original ‘as-is’ timing diagram now looks like this:
We still need to account for operating expenses, including salaries, utilities, rent, marketing costs and so on, and we can safely assume (but check this for your business) that bills arrive uniformly over the 150 day OCC period, meaning some will be paid immediately (day 1) or have to wait (day 150). On average this is 75 days.
You should now interpret the information as follows;
- The OCC is 150 days, but because the business has 30 days to pay its suppliers, the CCC is 120 days. In other words, cash is tied up for 120 out of 150 days (80% of the time).
- In terms of operating expenses, we assumed a uniform distribution over the period whereby some creditors would be paid immediately and some would have to wait for the 150-day cycle to finish. On average, this leaves us with 75 days or 50% of the OCC.
Related: Mobility, Security And Your Business
Step 3: Unlock capital in your business
We now know for how long our cash is tied up, but we still need to determine how much is tied up. Using the ratios in the original income statement, we can now answer the following: What amount of cash is needed to finance each unit of sale, and what is the amount of cash generated by each unit of sale?
Cash conversion at work on your IS
|Income statement line||Per ZAR||with CCC factoring||effective per ZAR|
|Cost of sales||0,60||80% (120/150)||0,48|
|Operating expense||0,35||50% (75/150)||0,18|
|Total costs||0,95||Cash tied up per 1 ZAR of Sales Revenue||0,66|
|Profit before tax||0,05|
|Free cash generated per ZAR of Sales||0,05||Cash needed for each OCC||0,66|
Putting it all together
Let’s look at what you now know about your business:
Self-funded growth rate
|The cash generated from 1 ZAR of sales||By looking at the income statement ratio||0.05|
|The time in days of your OCC||Calculated from holdings inventory days + accounts rec days||80 + 70 w= 150|
|The CCC time to cycle cash used in the OCC||Calculated from OCC – accounts payable days||150 — 30 = 120|
|The cash tied up in each OCC for a 1 ZAR sales income||Restated IS with CCC factored in for OpEx and inventory||0,18 + 0,48 = 0,66|
|Your per cycle growth rate||Free cash that can be added to the OCC cash requirement||0,05 of 0,66 -7,57%|
|How many cycles can be completed in a year?||Days in year available divided by OCC||365/150 = 2,43|
|Assume a productivity factor for safety||90% as a reasonable contingency for strikes etc||2,43 x 0.9 = 2,19|
|Compounded annual self-funded growth rate||(1 + SFG) OCC cycles – 1) = (1 + 0,0757) 2.19 – 1 =||17,3%|
Driving growth in your business
So, how can you use this information to drive growth in your business?
First, your debtors book must exceed your creditors book. Then, if we just shorten our accounts receivable days from 70 to 30 days, the following would happen:
- The OCC is now 150 — 40 = 110 days
- CCC is 110 — 30 = 80 days
- Cash needed for cost of sales is 0,60 X 80/110 = 43 cents
- We have not targeted operating costs yet, which remain at 18 cents
- Round everything up and we now need 62 cents instead of 66 cents (6% improvement)
- Your per cycle growth rate is 5 cents/62 cents = 8% growth rate
- How many cycles can you do in a year now? 365/110 = 3,3 cycles; up from 2,43!
- This is a 36% improvement
- Add a contingency of 95%, which gives us 3,13 cycles
- Compound this over a year: (1+ SFG) nbr of cycles — 1) = (1 +0,08) 3,1 -1) = 26% from 17% originally.
That’s 9% growth and nobody noticed a thing!
- That large corporate account that you cherish and that one of your sales executives is overly proud of landing may well be destroying value in your business. Why? Because large corporate accounts tend to get over-serviced (and I doubt you allocate those costs properly) and tend to pay you late.
- Growing with a greater number of smaller customers, steadily over time, within your means and without being bullied delivers more value and less stress.
- There are easy and clever ways to add lots of value to your business, that cost very little to implement, but you do require an understanding of how cash gets tied up.
- Delegate, don’t abdicate. No entrepreneur is ever great at sales, production, operations and cash management, so get people who can complement your skill set, and allow you to do what you enjoy. That said, you can never hand the numbers over to someone else. Receive assistance if you need it, but know your numbers!
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