20 Dec 2021 Planning
I Love to Plan
Let’s face it, I’m a planner. My personal Facebook page says it best-Angie Noll, Keeper of the Calendar. I find value in planning, I am constantly planning our family’s next vacation, the kid’s doctor appointments, our family meal plan. Normally, in December, I am happily found joyfully planning gifts for Christmas and celebrations with family and friends. In business, December is my favorite month of the year…I get to forecast what goals and initiatives need to be planned for the coming year. I get to help my clients do the same. I get to go through my financials in detail, prioritizing every spend and immersing myself in determining which widget has the best potential to sell in the coming year and how many can I sell of this widget and that. This year has been a bit different, I find the energy sucked out of me because of uncertainty. I don’t know what our 2021 looks like and I have had several painful conversations with clients whose businesses are on the verge of dissolving in 2021. Dr. Seuss knows it best, “Waiting for a train to go or a bus to come, or a plane to go or the mail to come, or the rain to go or the phone to ring, or the snow to snow or waiting around for a Yes or a No or waiting for their hair to grow. Everyone is just waiting.”
Boo! Done with the whining and the waiting! Let’s get back to planning! There is much we can do for the health and wellness of our business, even in The Waiting Place. Let’s get to it! As an entrepreneur, I carry my strength and resilience with me. As we turn ideas to actuality in 2021, here is a framework to keep in mind:
Positive Cash Flow:
To keep our businesses afloat, we must have positive cash flow. Even if our business has been deeply hurt by pandemic, there are many things we can do to improve cash flow; having cash on hand is of utmost importance.
- There is still time to take advantage of the CARES Act EIDL Loans, if you have not already! We observed a lot of clients take advantage of the PPP loans that were launched in March but not nearly as many business owners acted on the Economic Injury Disaster Loans and you can still apply through year-end 2020. The interest rate is low at 3.75% for small business and the term is long at a 30-year term with no penalty for pre-payment.
- End unprofitable relationships. Sadly, sometimes our biggest clients are our most unprofitable relationships because we have allowed the “big client” to yield unruly terms because of the increased volume. Be sure that all your clients are profitable clients. While it makes sense to have a 100-pound gorilla whose business allows you to open more opportunities or keep a “lost leader” product on hand who might drive clients to more profitable products, all clients still need to be cash-positive. Margins matter and if it is costing you more than you are gaining, those relationships may need to end.
- Keep your financials up to date. Small business owners get so busy working in the business, they forget to manage their accounting properly. You can’t do cash flow planning if you don’t have your books up to date. You will never know how much cash you have on hand. In times like these, one must take the time to have updated, accurate financials and to review them at least once per month, preferably more frequently in times of tight cash flow.
- Find hidden money in your accounts receivables. It is time to collect on those that have been slow paying you…or not paying you at all. The longer you let receivables go without collection, the more it is costing your company and the less likely you are to collect anything at all. Here is a great chart that visualizes how the opportunity to collect decreases over time:
Measurement is Critical:
Now is the time to set up monthly financial and sales dashboards in your business. Collecting and keeping this information will fuel your decision-making criteria as you try to keep your business afloat and hopefully prospering. Here are some key metrics that we like to track at Reconciled Solutions:
- Sales and Marketing Dashboard: Number of new qualified opportunities, where the new lead come from, Conversion to client rate (sales won/lost ratio), number of people who opened the newsletter, how many engagements on social media, which posts are driving engagement.
- Financial Dashboard: Cash on hand versus same time last year, Revenue by income stream versus last year, Month-to Month revenue goal, Debts and Liability Amount versus last year, Net income versus last year, Monthly review of cost comparisons, Gross Margin per revenue stream.
- Operations Dashboard: Revenue generated per employee, efficiency and timeliness per employee, cost comparison per employee, client satisfaction on work completed, average duration of onboarding time for new client, budget to actual job costing, accuracy of job costing in comparison to the budget set for the job.
Bounce Back in 2021
Are you familiar with Mike Michalowicz’s new book, Fix This Next? In my opinion, it is the 2020 book of the year. I loved it so much that I became a Fix This Next Certified Advisor. As our business grows and changes, so do our challenges. What are you going to Fix Next in 2021? Mike uses the OMEN Method (Objective-Method-Evaluate frequency-Nurture) to identify and fix our business troubles. (Click here for a printout of the OMEN Worksheet.) As we launch into a new year and say goodbye (good riddance!) to 2020, know that as time passes, we are stronger because of tools like this. I challenge you to take a few quiet days of shelter-in-place and spend time forecasting and planning for 2021. Evaluate cash flow, set up monthly dashboards to track key criteria in your business, read Fix This Next… Better and brighter days are just around the corner for entrepreneurs like us. Resilience is the ability to adapt to challenges and bounce back quickly. Prepare, fellow entrepreneurs, 2021 is the time to bounce back!
