Staying afloat— in terms of cashflow—can be a problem if your business does not experience a continuous inflow of money.
Without a strategy, you can find your small company suffering between payments, and experiencing revenue gaps that can interfere with normal business ops.
Kabbage spoke to two entrepreneurs; Linda Jordon of Diamond Realty Investments (a real estate firm), and Jim Brady of Shaker Consulting (a small-business consultation service), in a bid to understand how they work to weather their cashflow storms.
Here’s what came out.
Change Your Approach to Keep Cash Flowing In
Linda Jordon purchases, (sometimes) remodels, and sells homes, only to earn an ROI after completing a sale. But while awaiting a deal, she still has to pay office rent, business expenses and clear wages, among other costs that goes into a reno.
“This time varies, depending on how soon you remodel, and how fast inspection agents give a go-ahead,” says Jordon. “In cases where renovation happen quickly, and a cash buyer shows up, it is possible to complete a sale in 30 to 45 days. However, longer remodeling days and months of customer search can mean months without profits.
So Jordon remedies these problems by changing her approach from time to time to keep the money coming to her. “The idea is to complete a sale every month to maintain a steady cashflow!”
She goes as far as skipping the remodeling stage to make a sale when she foresees cashflow problems.
Changing your approach in this manner, depending on your business model can help you weather your cashflow storms.
Tap into a line of Credit
Jim Brady, takes a different approach to maintain cashflow at Shaker Consulting. His company assists small firms to streamline their approach in selling products & services to government organizations.
“Some projects are large and long-term, while others are short, which makes cashflow unpredictable,” says Brady.
So the entrepreneur uses a line of credit to cover business expenses when cash is limited and ops must go on.
“It is a flexible way to keep things going when cash is a problem— more like a “safety net” to me!”
Cashflow is important for any business, small or large. That explains why you must plan to deal with it is money is not an everyday thing in your business.
Author Bio: Michael Hollis is a Detroit native who now lives in Los Angeles. He is an account executive who has helped hundreds of business owners with their merchant cash advance solutions. He’s experimented with various occupations: computer programming, dog-training, scientificating… But his favorite job is the one he’s now doing full time — providing business funding for hard working business owners across the country.