Bridge Gaps Before They Happen
President Dwight D. Eisenhower famously said, “Plans are useless, but planning is indispensable.” When you’re running a business or organization, it can be difficult to find the time to step back and look at your operations, goals and opportunities. In fact, it’s easy to fall into doing the same thing over and over without realizing it. Yet taking a moment to reassess your long-term vision can be very meaningful, especially at the beginning of a new year. Personally, I like to take the time to reflect on what’s driving our sales and Key Performance Indicators (KPIs). I’ve also found there are a few other things to stay on top of.
When it comes to cash flow, timing is everything.
Cash is king, but it can also be elusive. The Small Business Administration (SBA) reports that 25% of small businesses fail due to cash flow challenges. Many times the problem isn’t a lack of money, but a disconnect in timing. You may need to lay out money before sales happen, and that can create a significant financial challenge. How do you pay suppliers before you have cash in hand? Do you raise equity? Get a loan? Bring in other investors? You may find you have capital gaps you’ll need to bridge and loans can take months to process. It’s important to be well prepared to determine what, when and how — what you need, when you need it and how you will pay it back.
Be vigilant, watch these three cash-flow metrics.
Entrepreneur.com outlines three of the most important cash flow considerations. “Inventory turnover” measures how long your inventory sits and occupies your cash flow. “Payment days” measures how long it takes for you to pay your vendors. “Collection Days” measures how long your business is waiting to get paid. Projecting for these metrics 12 months ahead and reassessing over time will keep you prepared and safe from cash-flow gaps.
Remember your resources.
Another thing to consider is your resources. It’s easy to get caught up in the “if something has to get done, do it yourself” mentality. That can wear you out (physically and emotionally), and deny yourself valuable information and ideas. Your lawyers, advisors, bankers, family and friends are all leverage points. Have them work for you to get more done and provide input into progress or shortcomings. Often people in your network have helped others or experienced themselves some of the challenges you may be facing and will have time-saving insight.
Assess your Progress.
Throughout my career I’ve had the opportunity to try different timelines to ensure I’m reaching my goals. I have found that a 60-day cycle is best for reassessing goals and operations. Sixty days is enough to show progress (or not) and enable reflection before tweaking the plan or changing course. Longer than 60 days can allow inefficiencies to continue too long.
When reassessing goals, I’ve found it best to start with a review of your projections and estimations, then compare the plan versus the actual numbers. Always look to identify what changes you should make in your projections and assumptions, and whether it’s valuable to change the plan you’ve built around them. Remember where you started and where you want to end. A lot can happen during that time, which can be ok, as long are you’re prepared.
Bridge your gaps.
Of course, it’s important to keep in mind that not everything will go right. So when thinking ahead, expect obstacles. But with solid planning in place, you can ensure you stay on the road that you always intended.