If there is one piece of advice I would give to someone running a startup business, it would be this; Cash. Is. King (or Queen).
Like a baby brought up on milk, I remember being raised as a business with ‘Cash is King’ as my nursery rhyme! Make no mistake, whatever way you look at it – cash is at the top of the empire!
Number one piece of advice (and another post altogether), can you get any cash for free? Can you apply for a grant or overdraft? When setting up NOTHS, we were able to get a smallish loan and overtime established an overdraft.
Running out of cash needs to go up there with the all time ‘Oscar winning’ stress creators! The sleepless nights, the worry and the panic. All of which distracts you from thinking clearly and thus getting yourself out of the mess. As a woman that’s flown by the ‘zero and minus’ balances many times and tasted first hand the utter misery this worry can create, let’s just go over a few simple but good business tips.
Plan: It’s pointless just having a cash forecast for 6 -12 months. You must plan for 18/24 mths. To get the full picture. That means you need a P&L that’s accurate.
Be conservative: My goodness this is where I see people so often go wrong. I’ve found you can attribute almost any pattern in life to the 80/20 rule. You will 80% of the time have too much income planned and 80% of the time have your costs too low. This is the sick joke that business plays on us!
Buffer: Plan a 10% buffer for everything: 10% on top of your months costs. 10% on top of tax etc. If you don’t need it – perfect.
Credit: Dedicate a day to negotiate payment terms. It’ll be well worth it. Negotiate the best terms you can, with everyone. And then make the best of those terms! If you are given 30 days credit, pay on day 30, and not a day before. You need to keep as much cash in your business as you can.
Learn: Every month look at your bank statement, and tick off each entry. What costs had you not budgeted for? Note them down, and check you needed them. Check it all looks right and learn your lessons, to make sure you don’t make the same mistake next time.
For countless years I used to be a hawk with the ‘old’ excel spreadsheet. If I started getting relaxed about buying real post it notes and not some own brand copies – I knew I was not being careful enough!
Keep hold of every penny you can. You never know what’s around the corner.