Practical Solutions to Help Business Owners Solve

Their 5 Biggest Challenges Part 2 The last article we spoke about managing your time. This is the second of five articles. Stretch you're Money - Most business owner's self-finance so their business will only operate as far as their cash holds out. We will show you how to find extra cash flow from your existing business and tools that make it easier to create a plan to ensure you will have the funds to achieve your goal.

Did you know that thirty percent of business owners worry about cash flow - and for good reasons. Most businesses will only go as far as their cash flow will take them because they are self-funded. Healthy and positive cash flow is essential to achieving success in any business regardless of how you define success - rapid growth, a valuable business, having a job you love, or the freedom to work for yourself. Cash flow is the "lifeblood" of a business, the single most important measure of your business's health, and the key ingredient to growing the value of your business assets. To help you stretch your money, we have outlined three actions you can take:

1. Measure, manage, and maximize your cash - Successful businesses owners get the information and help them need to measure and manage cash flow as closely as possible. The best try to forecast cash flow into the future.

2. Bootstrap more investment capital from your cash flow - Successful business owners are able to stretch their money and minimize external capital by employing a set of seven methods that can squeeze extra investment capital from their existing cash flow.

3. Create a capital plan before you need capital - Successful owners decide how much capital they will need to achieve their long-term goals long before they need it, and put in place a plan to obtain it on favorable terms.

Seven Ways to Bootstrap Cash Into Capital

1. Speed cash receipts - Speed receipts using customer terms, incentives, and segmentation, for example, offering incentives to customers who pay in 7 days instead of 30. Invoicing faster means cash comes in faster - there is no rule that says you must wait until the end of the month to send an invoice.

2. Slow cash payments - Slow payables with terms, leases, and matching expenses. Payment terms are a tug-of-war. You cannot win every battle, but if you make sure you are doing your fair share of tugging, you can gain significant control and flexibility over your cash flow.

3. Share resources - Share offices, equipment, employees, and resources. Think about sharing resources before you add fixed costs. If you look around your industry or the local business community, you will likely find peer businesses with extra people, office or warehouse space, inventory, equipment, or systems capacity.

4. Match expenses to income - Match income to expenses by reducing inventory, fixed costs, and leasing. Turn fixed costs into variable costs whenever you can by cutting the fixed expenses, inventory, salaries, rents, and overhead it takes to run and grow your business.

5. Smooth cash flow - Selectively use credit to smooth inconsistent or seasonal cash flow to fund growth or invest ahead of the curve. Seasonal cash flow often stops owners from making smart, high-return investments that might take a little time to generate cash income.

6. Find deals - Take advantage of barter, grants, credits, deals, and subsidies wherever possible. It is likely the people sitting around you on your last commercial flight paid a different price for their ticket than you. Successful business owners assume they are paying too much and actively look for better deals on their major expenses.

7. Invest spare cash - Put free cash to work in savings and investments. Many business owners keep a cash "cushion" around as working capital to fund the ups and downs of a business, or simply so they can sleep at night. By investing this extra money, you can generate thousands of dollars in extra capital without a lot of work.

"Cash flow is the lifeblood of your business." -Sam Frownie

Resources to Help You Stretch Your Money

• Lifeblood: How Successful Business Owners Achieve Wealth, by Sam Frowine, (Authorhouse, 2006) teaches you smart money rules to help you build and protect your cash - the lifeblood of your business and the number-one measure of your company's health.

• Business planning expert Tim Berry has authored several books that can provide you even more detail on business planning including The Book on Business Planning, (Palo Alto Press, 2000) and The CPA's Guide to Developing Effective Business Plans, (Palo Alto Press, 2001). To read an article by Tim Berry on what happens when you don't create a business plan, turn to page 16.