(For part I of this two part series, click here)
The business world seems to be really hot right now, no matter what sector you’re in, and that probably means jumping on each and every opportunity that comes along. That’s just naturally what most business owners do because their main goal is growth. Frankly, if you aren’t growing, then you’re probably losing market-share to your competitors and other companies that are much more aggressive. This is a given but you need to be cautious since it’s a fact that some companies end up going out of business because of too-rapid growth. We call it “growing broke”!
Don’t Celebrate Too Soon!
While you’re celebrating all of the successful growth that your business has been enjoying, it’s important to know that you can still go broke even if your business is profitable from day one. How do businesses go out of business in this situation? It’s called “growing broke” and here’s how it happens:
- Overhead costs naturally start on day one.
- You may be billing by the hour and invoicing monthly.
- Then, your clients/customers get 30-60-90 days to pay.
- Your overhead continues.
- Payments from clients run far behind invoicing and overhead.
- This means overhead from day one vs. future payments received.
- Everyday spending gets you into a negative cash flow position.
- Negative cash flow = a dangerous position.
- Running out of cash= going out of business.
- That’s an unforgivable sin in the business world.
This is how you can fix it:
- With increased profits,
- With more positive cash flow,
- Many businesses, especially services-based businesses can:
- Negotiate better AP terms = longer time to pay,
- Negotiate better AR terms = shorter time to get paid,
- Switch from hourly billing to contract pricing and get paid on the first of the month.
From Negative to Positive
Now, you’ve gone from negative to positive cash flow and are no longer “growing broke”! At DeepSky, we know all about the steps that are necessary to keep from “growing broke”. Let us help you with the accounting paperwork necessary to turn your negative cash flow into positive cash flow. Having accounting experts walk you through this process can mean the difference between positive growth and “growing broke”, which can result in having to post a “going out of business” sign on your business.
Contact Us Today
If you’re ready to simplify your accounting and find the answer to your “growing broke” problems, just give us a call. At DeepSky, we’re ready, willing, and able to help you find a solution, so contact us at (949) 200-6829 for a free quote.