By Tommy Mello, Owner of A1 Garage Doors.
When it comes to doing business, cash is still king.
You might be going viral on social media. Or your sales might be shooting through the roof. But if you don't have enough cash to reinvest in your growth, it's just a matter of time before your business fails.
Profit without cash is not a winning formula in the long run. If you don't have cash on hand, hiring employees or doubling down on your successful marketing campaign is 10 times harder. Want to make sure you don't fall into that trap? Here are my four best tips to help you stay afloat and keep cash flowing consistently into your business:
Invoice Right Away
This one's fairly straightforward: the faster you invoice, the faster you get paid. When you invoice your customer immediately, this makes your life a lot easier. Why? They still remember all the details of your service and they won't argue with you over the fee. If you wait until a couple of weeks later, things might be a bit different. Your customer might have forgotten about the extra work you did or how they promised you a larger fee for a faster turnaround.
Ask for Deposits
Especially when you're working with new customers, consider getting an upfront deposit before getting to work on a project. That helps with your cash flow and also reduces the risk of miscommunication (discussing pricing and costs upfront will make sure both you and your client are on the same page.) Last but not least, deposits tend to scare away bad clients -- the kind who would only hurt your cash flow in the long run anyway.
Fire Bad Customers and Vendors
Have you heard of the 80/20 rule? Eighty percent of your revenue comes from 20 percent of your customers. So focus your efforts on your best customers and stop working with the unprofitable ones. Do the same with your vendors as well. Our CRM allows us to flag out our worst customers and we blacklist these guys and make sure we don't work with them again. We're talking about the ones who are impossible to get hold of, never pay on time and have a ton of unreasonable requests. Your life would be much easier without them in it and they don't contribute much to your revenue.
Offer Smart Financing
Some customers just won't be able to afford your payment upfront and without financing, you will never get their sale. So, offer them a few ways to finance the purchase. Every business has to fork out some form of acquisition cost to get new customers. By offering financing, you'll be able to reduce that acquisition cost significantly, as you're immediately capturing a larger customer base. Other than the standard payment by installations, you can also incentivize your clients to pay promptly by offering certain benefits (such as 5 percent off if the bill is paid by X date.)
For anyone who's running a business, I can't emphasize the importance of cash enough. You can be doing everything right, but if you run out of cash, that's it. All that blood, sweat and tears go down the drain. So keep your eye on the prize (in this case, your bank balance!) and use these tips to make sure you never run out of cash.
Tommy Mello is Owner of A1 Garage Doors, a $25M+ home service business.