How to Release Cash from your Business
Whilst some small businesses have managed to maintain growth and profitability over the last year, many SMEs are still feeling the effects of one of the worst downturns for decades. A number of our clients who have business coaching have found that their market has changed significantly over the last year and that previously reliable customers and contracts have been cancelled or lost, or that the contracts have become uncertain.
Now, more than at any other time, it is imperative that companies seek to find growth where they can. Businesses that are innovative, motivated and optimistic will be the ones that not only survive, but come out of this recession healthier, more dynamic and with a spring in their step. But the trick is in knowing what to do, when to do it, and how to do it. Business coaching has enabled many companies to capitalise on the potential that definitely exists with this market.
Make a Plan
With business coaching we find that one of the greatest restrictions for pro-active development is the availability of cash, particularly as many of the banks are still proving remarkably resistant to parting with any of theirs. In this situation, finding ways of generating cash within the business can make all the difference, and one effective way of doing this is to instigate an effective 'Cash Gap Plan.'
What is the Cash Gap?
Whatever business you are in, you are nearly always involved in buying in materials or stock, paying staff and doing some work, in order to provide the goods and services which you sell. In many cases you will buy these in ahead of time and most likely have to pay for them before you actually use them. This moment of payment we refer to as the ‘Cash Paid’ date. You then sell your products and services and invoice your customers and clients. They usually have a period in which to settle the account before you receive the cash in your account – the 'Cash Received' date.
The Cash Gap is quite simply the period of time between these two dates.
What is not always fully appreciated is the BIG difference that can be made to the cash flow of a business by getting to grips with this Cash Gap. This is one area where we can really help owners through business coaching.
HOW MUCH CASH COULD YOU FREE UP?
Take Business A, a food processing company with a turnover of £1.1 million. Their Cash Gap absorbed approximately £3,000 for every day. This meant that their average cash gap of 87 days absorbed £260,000 worth of funds. Putting in place a Cash Gap Plan and reducing their gap to 58 days, released £87,000 of extra cash.
All this extra money, just by putting in place an effective and efficient plan!
Imagine what you could do with that extra injection of cash into your business.
THE CASH GAP PLAN
- Do you know how big a difference reducing your Cash Gap by one day would make? … and if you reduced it by a week? … or a month? … or more?
- Do you know how big your Cash Gap actually is?
- Did you know that some companies have a negative Cash Gap?
… that is, they always get the money from the customer before they spend anything out.
So, if I asked you – "What kind of a Cash Gap Plan do you have?" what would your response be?
That is to say:
What kind of a plan do you have, in place now and operated consistently on a daily or weekly basis, to:
- collect quickly outstanding money from your debtors
- get your customers to pay on time, and
- improve your terms with suppliers
… so that your bank account always has plenty of cash in it?
START NOW!
If you don’t have such a plan in place, now would be a good time to develop and initiate one, and start the cash flowing into your business.
As the old Chinese proverb goes: "When the winds of change blow, some people build shelters; others build windmills."
Without cash how are you going to move forwards and create that 'windmill?'
Anthony Bagshawe
Business Coach
If you would like help to set up a ‘Cash Gap Plan’ or to find out more about how Business Coaching can help your business, visit our website at: www.newtonbagshawe.co.uk or call me on 01969 667896.
How to Find the Right Business Coach
Business Coaches come in all shapes and sizes, from a multitude of backgrounds and with many different skills and qualifications. So how do you navigate your way through all this to find the right coach for you?
This guide suggests the key questions to ask.
Selecting a business coach is a little like recruiting anybody else that is going to work for you.
There are three basic steps to go through:
- What is the job description?
- What knowledge, skills and experience are necessary for the job?
- What personal qualities and attitudes do you want in the person?
The questions to ask therefore, can be considered under these categories.
1. Job Description
Before asking any questions about the coach, the first question to ask is: “What do you want to get from the coaching yourself?”
For instance, are you looking for:
- Someone to help develop a strategic vision for the future
- Guidance on sales and marketing plans
- Improving staff motivation and performance
- Growing and re-structuring the business
- Getting better financial control and increasing profitability
- Implementing efficient and effective systems
- Producing a clear exit strategy
- Developing yourself and/or others in leadership
It doesn’t really matter whether you want one or several of these, or whether in fact you are not clear exactly what you want. It is just that you need to have some idea of the answer because it will depend what you need from the next steps.
2. Knowledge, Skills and Experience
Once you have got an idea of what you want from ‘A’, then you will be better able to find out whether the coach has the right expertise for you. Since Business Coaches come from a wide range of backgrounds this may not be an easy area to assess accurately.
Questions in this category include:
“What qualifications do they have?” Coaches can collect many different qualifications in and around coaching, with varying levels of theoretical and practical training involved, making this a complex area. In addition, people have very mixed views about the real values of paper qualifications. Nevertheless it is still a question worth asking because once you know what they have, then you can decide for yourself how much emphasis to give that.
“What is their background?” Good coaches come from a variety of backgrounds, so it is not necessary to require that they come from any particular background, but you need to satisfy yourself that they have developed some significant understanding of the areas in which you want their assistance.
“Have they dealt with any similar situations?” This allows you to find out whether the coach has specific coaching experience of the field in which you are interested. It is important to appreciate that business coaches are not purporting to be experts in your particular business or industry – they leave that to you. They are experts in assisting you to create the kind of business that you would like, so experience in similar situations may be useful, but not necessarily essential.
3. Personality of a business coach
In many ways this is the most important category. A business coaching relationship, particularly one than endures over time, can be very personal. In an effective partnership you will be discussing confidential commercial information as well as exploring your own personal strengths and preferences. It is therefore vital that you feel at ease with the person you engage. You do not need to like them socially, but you do need to be comfortable with them on a business level.
The kinds of qualities that you are likely to be looking for include:
Professionalism How do they treat you when they communicate with you? Do they present themselves well?
Integrity Are they discreet? How important is confidentiality to them? Do they encourage honesty and straightforwardness? Do their actions match their words?
Confidence Do they have sufficient confidence in their abilities without appearing over-confident?
Empathy Do you feel a rapport with them? Do you get a sense that they are listening to you fully, and that they understand your situation?
Reliability Do they do what they say?
"Over the past seven years, I've had the pleasure of getting to know Anthony on both a personal and professional level. His analytical skills and business instincts are excellent. He was able to identify several key decisions I had to make in order to achieve a breakthrough in my business, and with his coaching, I was able to navigate a new direction for my company that I never thought possible. Anthony's business coaching was valuable beyond measure."
Jason Elen
I hope that this has been helpful in highlighting the major features that you need to consider before engaging a business coach. If you would like to discuss any aspect of this in more detail, then please ring 01969 667896 for FREE objective assistance and advice.