How to avoid an ongoing cash flow crisis

A reader emailed me this morning, about his latest cash flow crisis. He asked me for some advice on how to overcome it. I promised I’d answer here, as it’s a very common problem for a lot of business owners right now.

My reader put his problem like this: “I need to sign-up 5 new customers by the end of December, to avoid another cash flow crisis”.

Here’s my advice, which is relevant to almost any business owner with an on-going cash flow problem.

The wrong focus blocks cash flow

In my reader’s case, if he does focus on getting those 5 new customers, there’s a reasonable chance he will make it happen. Or come pretty close to making it happen. I don’t have any details about his business. But I do know that in business, we tend to get what we focus on – good or bad.

So, whilst there’s a good chance that he will be motivated to get those 5 new customers, if he does get them, he will have also just planted the seeds of his next crisis! That’s because those 5 new customers will simply buy him some time until he’s in the same position again.

Here’s a far better way forward. It’s based around 2 adjustments that can radically improve your financial situation… and your life!

1. Fund your business correctly

Cash flow can be resolved relatively easily. But only after you understand that on-going cash flow problems are rooted in the way you feel, think and act regarding money. When you overcome this block, the cash starts to flow like never before.

Your accountant will be able to explain how successful business owners fund their businesses correctly. If you don’t have an accountant, ask your financial adviser or business banking manager. It’s extremely straightforward.

2. Set exciting, compelling sales targets

Always, always set motivating targets that correspond with a thriving business. The kind of epic targets that will lead you to a massively better quality of life. Never set targets that merely help you to scrape by.

Here’s why the right type of targets are critically important for you and your business.

• Targets that inspire you to thrive are exceptionally motivating. They also cause you to make decisions based on what you want. They bring energy, ideas and confidence. Confidence that encourages others to buy from you, hire you and believe in you. These combine to dramatically improve your results. And fast!
• Targets that are about surviving your latest cash flow crisis are motivated by fear. And even if you hit the target, you’re still in a precarious situation. You just scraped over the line. And you’re left waiting for the next cash flow crisis, because your underlying problem remains. So, you end up with anxiety and stress, regardless of whether you hit the target or miss the target. That’s a self-defeating loop, which makes it impossible to build a successful business.

In short, a poorly funded business, focused on trying to stay afloat, is guided by fearful, short-term thinking. It has an extremely limited horizon.

The answer is to resource your business correctly. And set exciting targets that motivate you to build a financially powerful company.