Why Business Growth may not be the answer to solving your cashflow problems.

Why Business Growth may not be the answer to solving your cashflow problems.

It is instinctive to want to try to increase your sales income as a way to solve your current cash flow issues. After all shouldn’t more money coming in, mean more money available to spend?

Unfortunately, in most circumstances this is simply not the case.

Firstly understand how your money flows through your business and you will get an insight into what is happening to your cash.

When you increase your sales volumes, this will have a knock on effect on the costs that are being incurred. These are the costs which directly relate to generating those sales. E.g. If you are a service type company, more sales often means more resource time and that means more money out. If you are a product type company, more sales will mean more money on materials and also resources.

Furthermore, in some cases, where you are pushing for more sales, this will often require you to spend on large items which you believe will generate further sales. Marketing, computer equipment and more support  resources, are the common growth areas of spend which are required in order to generate more sales.

Herein lies the problem! How long have you got before you run out of cash?  Is this going to happen before the additional sales materialises?

If your business is already spending more money than it is getting in, this will compound the problem and actually accelerate your decline.

So what is the solution?

Slow down, yes don’t stop, just slow down and consolidate your position. Don’t stop working on growth but you need to also set some time aside to really get to the heart of why your business is in the position it is in. If you grow your business when it is unprofitable or has its cash ‘stuck’ somewhere in the business, you are in danger of simply turning a small loss into a bigger loss or worst still, losing your business altogether.

Take a look at your current business model and see where you are not profitable, rationalise your costs base and free up spend for your growth.

Then, when you are back in good shape, GROW FAST.

Would you like to find out how to do this with a focused approach? A simple approach which will save you time, so you can spend more time growing your business?

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