Why it’s all about cash
In my book the first thing I talk about is cash and the reason for that is without cashflow there is no business.
So there is no point me telling you how you can improve sales, marketing & operational processes if you don’t have cash.
98% of the UK economy employs staff from small & medium enterprises – they are the backbone of the economy here in the UK. There are over 3m small & medium businesses in the US. This is a big market, a big employer.
You may have heard the saying turnover is vanity, profit is sanity & cash is king. Most businesses that fail don’t go out of business because they are not profitable, it’s because they run out of cash.
I will give you an example. A £5m revenue training business – they provided training solutions to the military. This was a global business with clients in many countries. One of their clients was a middle eastern government – and they had won a contract that was going to produce £1m in revenue. To deliver the training it was going to cost around £600k, so this was a profitable piece of work (£400k).
The problem was they negotiated silly payment terms (the middle eastern government were going to pay in 12 months).
So, they had won a £1m contract, was going to cost them £600k to deliver, leaving £400k profit.
However, they were going to incur the £600k costs upfront (flying staff over to deliver the training, hotel, flights, living & subsistence costs for staff [this was a 6-month contract]. So, on paper, they made £400k profit, but had a £600k cashflow deficit. This almost put them out of business!
You may say it was madness to negotiate such long payment terms – I agree – I said to the owner ‘Why did you take the contract’ he said, ‘because it was 20% of our annual revenues’. Like I said turnover is vanity, profit is sanity, cash is king.
In my book I give some tips on how you can quickly release cash in any business.