Hello, this is Jennifer Dawn with Profit Plus Advisors and in one of our recent group coaching calls, this question came up from a client who is experiencing some pretty severe, short term cash flow problems. He said:
“I’m operating in the red and need to turn things around fast. What can I do to generate cash quickly?”
This is a great question, and if you’re operating in the red, one that you really want to have an answer to. What I recommend for my clients and the people that go through our program is this.
When you’re in the red and you need to generate cash quickly, you need to be more aggressive than say, somebody who’s operating in the black and just trying to improve profitability. When you’re in the red, you absolutely must close that gap as quickly as possible. The way to close it is two-fold. One, of course, generate more revenue as quickly as possible. But two, you also must cut operating expenses. That will get you into the black faster than anything the combined power of more revenue and less expenses.
When I first started my software company years ago, I hired a business coach to help me and the one thing he taught me was, “Jennifer, for every dollar you spend, you need to earn three.” And I was like, “What? Are you crazy?!”
As I really thought about it and went through the years of my business, I realized he was so right. For every dollar you’re going to spend, you really do have to earn three. So if you want to close that gap so you’re not operating in the red, the quickest way to do it is to just not spend that dollar in the first place. Go through your operating expenses. Look at making cuts as aggressively as you possibly can.
And on the flip-side, as far as generating cash quickly, what I suggest is that you start taking a set amount of your time each day and really focus on growing you sales. When I work with entrepreneurs and I ask them, “Where does your time go?” It usually goes in all these different directions, but rarely into revenue generating activities. So it’s not really a surprise they are suffering on the sales side when none of the best time and efforts are put into it.
You may notice whatever area of your business, wherever your efforts are going, maybe your efforts right now are going into operations or they’re going into customer service, those areas of your business are probably doing a lot better than sales because you’re not putting your time and effort into them. So just re-shift yourself. Make sure you’re putting enough time into the sales effort and cut those expenses. That’s the best double whammy that I know to get you back in the black quickly
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