Many businesses grow out of business rather than go out of business. That's the painful truth my co-founder and I learned after Nourish--the spill-proof bottled water company we founded in 2007--closed a deal with our dream customer and it ended up killing our company as a result. The rapid growth, coupled with late payments from this big retailer, led to a cash-flow crunch that prevented us from securing outside capital to get to the next level. That's when we learned: Cash is king, but cash flow is queen.
In our new book, Level Up: Rise Above the Hidden Forces Holding Your Business Back, written with Heather Cabot, we share our humbling story, and how that failure led us to launch a fintech company called Now Corporation in 2010, which is aimed at solving one of the most vexing problems that keep small businesses small: managing cash flow. Over the course of our 15-year business partnership, we have discovered that some of the reasons our company stumbled were much bigger than the two of us. But we've also learned that small businesses can rewrite the rules. It starts with rethinking the way entrepreneurs approach growth. Here are some of the book's best parts:
Meet the Three C's of Growth
Understanding how money enters and exits your business is essential to sustaining momentum once your product or service begins to take off. Whether it's the influx of product, money, or purchasers, your attention should always focus on these streams. Placing an emphasis on outside funding is a recipe for disaster.
Instead, focus on selling your products or services to customers over and over. This creates the necessary flow of commerce and capital into the business. We like to call this equation the Three C's of Growth: Customers + Commerce = Capital. Given the media hype around sexy tech ventures raising tens of millions of dollars from investors, this formula may seem counterintuitive. But if you want to build a business for the long haul, you should first look to the people who buy your stuff--your customers--and the revenue they generate. That's the capital that will propel your startup to scale.
Unleash the Flow of Commerce
Making your customers central to your operation requires listening to their feedback. When you pitch a new account, don't just focus on landing the first order. Always think ahead to how you will fill the 10th order and beyond. Commerce is a flow, not an event.
Small businesses often fantasize about doing business with a major corporate customer as the next step toward success. But before you set your sights on catching Goliath, make sure you can deliver what you promise--and that the terms of the deal won't leave you scrambling. As we learned the hard way, new business should never come at the expense of sustainable growth.
Don't Take No for an Answer
Winning a big corporate account doesn't come down to one person giving the thumbs-up. Even if you have an in with the CEO, there are many more gatekeepers you will have to impress to get the job.
Position yourself to overcome the naysayers by looking for cheerleaders as soon as you walk through the door. Every person in the target company has value. Each time you get in front of a decision-maker, tout the impact of your product or service, not just the innovation. Remember, you aren't pitching your company or product to shareholders or CEOs. You're usually sitting across the table from people who need to hit certain targets to make their performance bonuses. Show how your product or service can help them achieve their immediate goals. Make it personal and do your homework.
The hidden forces that hold small businesses back are both external and internal. Some are systemic, like the barriers to capital for people of color and women, and the onerous payment terms that big corporate customers often demand from suppliers. Other factors are within your power. How well do you know your numbers? What's your plan for approaching new customers? Small-business owners need to know the difference between what we can control and what we cannot in order to sustainably scale our companies.