Things are definitely on the up. All there is less talk of survival and more about managing this new growth.
And that brings with it some new financial challenges. We knew what to do when things were tight; control overheads, don’t spend, don’t recruit; maybe you dropped your salary and stopped your pension? And the sense that cashflow was tight and the future less certain helped us to instinctively keep our finances in check.
But growth brings a confidence around money. One that can ironically create new cashflow problems because we start to find new ways to spend it!
Firstly there can be a pent up need to spend again. There’s that list of projects and things we’ve wanted to do for the last few years, take on new staff, invest in new kit, explore a new markets, and maybe treat ourselves?
And there are all the classic dangers of growth that I’ve talked about many times before – growth will eat your cash like nothing else and it’s something you have to plan for. More companies are starting to go under now that things are picking up.
We need a balance. And we need to build surplus cash back into our businesses that might have been burnt during the last 5 years.
Nothing gives you confidence like being a liquid business; having a cash buffer that you don’t touch. Knowing that if something goes wrong, or a too-good-to-miss opportunity comes up, then you’ve got cash to fall back on. Cash give you freedom and options. It takes the pressure off and lets you make better decisions, and it gives you the luxury of time to carefully plan where the cash is best invested to safely grow your business.
So my top tips are:
1) Have a really clear plan of where your business is going
2) Budget what it’s going to cost to get there, and be realistic. Be clear on how much growth will eat your cash in areas like debtors, stock, work in progress, new staff etc.
3) Build a cash buffer and resist the temptation to spend unless it’s on delivering the plan