According to the SBA, a company’s chances of survival is about 50 percent in the first five years. Babson University’s 2013 Global Entrepreneurship Monitor report says the top two reasons for going out of business are problems getting financing and business isn’t profitable. These two affected more than half of the businesses.
CB insights collected input from more than 100 failed startups. Almost one-third cited running out of cash as the reason for failure, the No. 2 reason. The first was the lack of market need.
The truth is that running out of money isn’t the company’s fault. It’s the side effect of another issue. Management could be making poor spending decisions, failing to raise enough working capital, or mismanaging cash flow.
If cash flow isn’t managed, any one of these five things can sink your business.
Are your customers satisfied with your company? Or are they very happy with your company? There is a difference here. Satisfied isn’t enough to hold on to them. They can easily switch if they notice problems with the product or service, or something better comes along.
How much should you spend to get new customers? When a deal or promotion opportunity comes your way that brings in new clients and grow your business, how do you figure out whether the deal will pay off?
Your gut feeling may have come through for you in the past. You let it dictate how much is just right, too much, or too little. What you think costs too much may end up bringing in more customers and profit than you expect.
Without knowing a client’s lifelong value, it’ll be impossible to determine whether an acquisition cost is too high or too low.
Yes, the above is a picture of a cockpit in a plane.
Are you about to fly? If so, bookmark this page and return after you’ve safely landed.
On land now? No more flying? OK, read on.
“Cash is king.” No doubt every small business owner has heard that. That’s because a small business can’t survive without cash flow. All the great talent means zilch if you can’t pay them and your bills.
But what brings in the cash? Your accounts receivable, or A/R. Accounts receivable is an accounting term for what your clients owe you for the products or services you delivered. Your invoices are a generated accounts receivable. Until you submit your invoices to clients, you won’t get paid.
This is a true story. Names have been changed to protect the innocent and the guilty.
A prospect contacted me interested in my company’s services. We discussed the project and came to agreement on the scope and price.
When I first heard about Twitter, I didn’t get its appeal. As I understood it, people could send short messages for others to read. That sounded like a public bulletin board. The Internet is full of special interest topic forums. People can send short messages to each other via emails, text messaging, online chat, and other ways.
So what’s the big deal about Twitter?
Have you heard of payday loans? You’d never consider such an option because it’d drain your resources, right? Merchant cash advance and business cash advances are like payday loans except they target businesses.
Thousands and thousands of business owners are stuck with MCA. To attract B2B companies, some MCA providers call it Business Cash Advance. An MCA may sound like a great idea, but it isn’t when you look at the full picture of how it works.
When a colleague first started his little business, he had two clients. One provided steady projects. The set up worked well since he could manage these projects outside of his corporate job. Yes, he worked two full-time jobs between the corporate one and his business. We’ll call him Joe. He wanted to build cash flow before quitting his corporate job.
Then the company — the steady one — went out of business. As for the other client … projects didn’t come in regularly enough to sustain business. Joe had to decide whether to resign to a life-long corporate career and keep the business as grocery money … or find more clients.
Before you consider going to a bank for a small business loan or line of credit, you might want to explore another option. A better one because it’s money that already belongs to you. The money you get from the flexible financing is invoice financing, which gives you the cash flow you need to pay expenses and grow your business. It’s also known as factoring and accounts receivables financing.
Accounts receivables are open invoices that haven’t been paid. It’s money a company is owed after delivering the product or service. Clients may take 30, 60, 90, or more days to pay the invoice. Some companies speed this process with flexible financing from a factor. The factor — a third party company — buys your invoices and gives you cash as soon as you submit them.