Not Knowing the Last Decision to Scaling Up Can Cost You!

Over the last 3 blogs, I’ve been walking business owners through the 4 Decisions a leader must make when looking to scale up their business.  We’ve reviewed the importance of People, the significance of Strategy, the power of Execution and now a frank discussion about the need for Cash.
 
If you're scaling up your business, it's going to require cash. LOTS of it.  It takes cash for things like adding people and equipment, facility upgrades, R&D, marketing dollars, and technology infrastructure, as well as increased material purchases and inventory to name a few.
 
Cash is the Fuel for Growth
Every growth business needs cash. And the more cash you can generate internally versus having to tap outside resources (such as debt or equity), the more control you have in your business choices.  Certainly, there are times to use ‘other people’s money’, but that should be mostly limited to funding growth initiatives, not supplementing gaps in your working capital.
 
The question is how do we generate cash? 
Or better yet, how do we generate consistent sources of cash faster?  Remember the game Monopoly? How do you lose that game? You run out of cash! And it's the same thing in business. I can't tell you how many businesses have had to shut their doors because they simply ran out of cash.
 
News Flash… Cash isn't the finance department's issue.  This is the company's issue, and the more you can get everybody aligned around what their role is in helping generate cash, the more successful you're going to be at uncovering cash resources within the business.
 
Let’s look at some examples…
 
• The Sales Group:  What if they focused on THE ideal customer, the one that buys at an optimal profit, pays their bills on time and refers business? It stands to reason that the sales cycle will be shortened, and you’ll get your deposit quicker (aka cash), too.
 
• Production:  What if you reduce or eliminate scrap completely?  How about reducing or eliminating rework, or reducing the amount of time it takes to produce a product? That's all real cash you can put back into the business to help you continue to grow.
 
• Safety:  What if you could improve cash flow by getting everyone to rethink job safety? Sounds farfetched – right? Well, that is exactly how Alcoa CEO Paul O’Neil turned around the company beginning in 1987 and then quintupled company profits over his tenure.
 
Has this new perspective helped you see the cash that is potentially lying all over in your business? And that absolutely everyone in the company has a role to play in generating it?
 
I’ll close with an old adage that goes like this: “Revenue is vanity, profit is sanity and cash is king”.