The Power of Cash Flow: Nurturing Business Health ??
Granger Forson
Helping Owners put their Business Growth on Auto Pilot | Lean and Business Coach | ScaleUp Radio Podcast host ???
In the relentless pursuit of growth and scaling, businesses often overlook the core health of their operations—cash flow. Cash is the lifeblood of your business, essential for every function, from daily operations to executing plans and providing performance feedback. Let's explore how to maximize this vital component, drawing wisdom from Kevin Brent's "Entrepreneurial ScaleUp System" (ESUS).
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The Paradox of Price
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Kevin Brent highlights the role of pricing in cash flow management. Many businesses fear increasing prices, but research shows that only 9% of customers leave due to price changes. The rest are influenced by factors like customer service and feeling valued. Consider this: a small price increase can significantly boost net profits without affecting volume or overheads. It's an example of applying "small changes" for profit maximization.
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Leveraging Small Gains
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Small changes can have a big impact. A 1% improvement in each of your financial levers, from marketing strategies to team building, accumulates and positively affects cash flow. This concept, known as the "Power of Small Change," is akin to the Theory of Marginal Gains, seen in practices like Mazda's 1% weight reduction strategy for their cars.
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Consistency Through 90-Day Planning
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Consistent 90-day planning cycles, as advocated by Kevin Brent, create a robust and healthy business model. It aligns your team, instills employee accountability, fosters leadership development, and provides a rhythm for performance feedback and efficient meeting management.
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Navigating Cash Conversion Cycles
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A focus on the Cash Conversion Cycle (CCC) can unlock hidden cash within your business. Improving CCC can boost EBIT and net cash position, reducing the need for external funding options. It aligns with the "profit first approach," ensuring a lean and robust business.
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The Cash-Health Connection
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Cash flow is the lifeblood of your business, just as blood flow is essential for a healthy body. Managing cash wisely fuels growth strategies. Apply the Power of Small Change and 90-Day Planning to transform profit maximization and overall business strategy. "Fix What Bugs You" by making consistent, small changes for smoother cash flow management.
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Grow People, Grow Business
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Initiate team dialogues around cash management strategies. Help your team understand how their roles impact cash flow, whether in marketing strategies or meeting management. "Grow people" by involving them in this critical aspect of business.
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The Bottom Line on Cash
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Consider the Profit First Approach to generate and retain cash. Create a workplace that fosters joy, encouraging efficient work towards common goals like profitable growth and robust cash flow management.
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Summary & Key Takeaways
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- Don't fear adjusting prices; evaluate their impact.
- Implement small changes for substantial gains.
- Embrace 90-day planning for continuous adjustment.
- Cash management is vital for business health.
- Understand value drivers and their impact on cash flow.
- Involve your team in cash management for better results.
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Aim for continuous improvement and leadership development as you nurture your business's health through effective cash flow management.
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Cheers to increased health! ??
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Managing Director at Merchant Factors
1 年Agreed! A strong cash flow supports a company's ability to invest, innovate, and adapt to changing market conditions. It's the indicator of a business's financial stability, and without it, even businesses with the brightest growth prospects can find themselves vulnerable. Maintaining a healthy cash flow is essential for any business looking to not just survive, but thrive in today's competitive landscape.