Running a business is much harder than it looks. If you see all these gurus on social media telling you that you can make millions sitting on a beach and never worrying, you should be careful of what they are telling you because in most cases, it’s just not accurate. Do some people make money while enjoying the sound of crashing waves? Yes, but if they’re smart, they are still keeping a pulse on everything.
They know their numbers, know what their customers and clients need and don’t need, and they are well tuned in to the health of their business. If they don’t know these facts and figures, they’ll be out of business before they know it.
There are several aspects of your business that you should be well up to speed on. Having a firm grasp on the health of your business is not only good for your business, but mission critical.
So, what should you know about your business?
Sounds basic right? Yes, it is. You should know what your revenue is for any given period of time. At the very least, you should know what your monthly revenue is that comes into your business because that can help you determine trends that are forming with your business. Are sales up, are they down? Last month we made XX and now we see sales are slipping. You wouldn’t know that unless you kept a close eye on revenue.
We know that for some, you have your busy seasons such as the lawn care professionals we serve, swimming pool companies and others. But please take time out to just check on your revenue.
So you know what you have for revenue but do you understand your cash flow? They are not the same. Cash flow is the money that is going in and out of your business. For most businesses, cash comes through sales of products and services. But it can also be generated by investments. Most businesses track their cash flow by the month.
You can have great sales but if you are sending out more money than is coming in, you’re going to have a cash flow issue. Cash quite simply is what you have on hand.
There are several factors that lead to negative cash flow. Out of control expenses, unforeseen expenses such as repairs or buying new equipment and of course, customers not paying you on time.
Speaking of customers not paying on time, that’s where your knowledge of your receivables becomes very important. Maybe your revenue looks great, but revenue can also be on paper. Which means you have not been paid for what you did or supplied. As a business, you never want to be surprised by how many people owe you money. You need to stay on top of your receivables for many reasons.
First, it’s all about cash flow. And when people owe you money, at affects your cash flow immediately. It also affects your attitude because most of us get upset when people don’t pay and you don’t have any legitimate reason why. You think you did a good job and met the clients’ needs but you didn’t get paid.
But keeping track of who owes you money is also about accountability. If you don’t have the systems in place to effectively track the customers that have not paid, or paid on time, you will lose money. The more time you let go by without getting more assertive in getting clients current in their payments, the less likely you’ll get paid for your services. Let months and months go by, and for some, they justify not paying you.
Chasing after payments that have not come in also costs you valuable resources in time and money that could be used in other areas of you business.
Know who owes you money and how long they have been late and have the systems in place to take care of that. That includes internal and the services of a reputable collection agency for more stubborn accounts.
Who is your ideal customer?
You should have a handle on your ideal customer because those, hopefully will be the most profitable for your business. You might have different criteria for your ideal customer but we feel that your perfect customer is profitable, easy to work with and even returns for repeat business.
Defining the perfect customer will allow you to find more like them, hopefully increase your profits, reduce the stress of working with less than ideal clients and give everyone on your team a roadmap to follow as you go out and find more customers like them.
There are so many more aspects of your business that you need to have a handle on but if you know where your cash is, where your cash is coming from and how to find your ideal profitable customer, you’ll be far ahead of many who don’t have a firm grasp on these parts of their business.