Last week I talked about “Cash Flow Issues - Overspending.” If you missed that post, you can review it HERE. This week’s post is “Cash Flow Issues - Are you thinking big enough? Part 1.” Are you limiting yourself with your thinking? Do you undervalue your services? These are things that will limit your growth and your cash flow. Learn more in this week’s blog.
“We have always done it that way.”
“We tried that before and it didn’t work.”
“No one will pay that much for my service.”
If you find yourself saying any of these things, beware. You are limiting yourself and your company with your small thinking. This will also limit your growth and with it, your cash flow. Over the next three posts, we will look at these statements.
“We have always done it that way.” This statement limits the amount of time you will be in business. What if your accountant insisted on doing everything by hand, just like it used to be done? You would have a room full of accountants doing your books by hand instead of an efficient staff using computers to get more done, more accurately and more quickly with more staff. The resources (think cash) committed to getting your books done would not be available to pay staff to generate sales or provide billable services.
The railroads used this thinking. In the 1800’s they were very important to the development of the United States. They spurred industrial growth in the first half of the century and the settlement of the West in the second half of the century. By the early part of the 1900’s, trains were used to move freight and people throughout the country. But the train companies had a very rigid view of themselves. Their success blinded them to the new ways of doing things that were changing the way that people and freight would move in the future.
Airplanes could move people more quickly and efficiently and weren’t limited to the routes where train tracks were laid. Interstate highways and roads for automobiles allowed trucks to haul freight more effectively, also without the route restrictions of the rail lines. By the time the railroads realized they were in trouble, it was too late to react to the changing conditions. Because they saw themselves as railroad companies rather than freight moving companies or people moving companies they were not able to adjust and survive at the level they were used to performing at.
The examples I used give you insight on how to address this limiting statement. In the first example, strong habits are the likely cause of the error. You want your staff to be consistent, but not so bound by habit that they can’t adjust when innovations come along that will help them perform better. Habits are good for efficiency, but need to be examined periodically. You don’t want to cut the ends off your roast because it doesn’t fit the pan when the pan has changed and that habit isn’t necessary any more. You will generate more cash flow by doing things more efficiently. Your expenses will be smaller on the same revenue.
In the second example, success is the cause that you need to address. You can’t allow your success to blind you to better and more efficient ways of doing things. There are two things you need to be aware of here. The first is that being successful will often keep you busy. Being busy can keep you from examining what you are doing for better ways of doing them. You just want to get done so you can move on to the next one and do the same thing again. You miss the opportunities that can make you more efficient and allow you to get more done. You miss another opportunity to generate more cash by spending less.
The second thing you need to be aware of here is that we tend to believe that our success will continue, even though we see so many examples around us where it doesn’t. A new team becomes the champion of a sport each year. Even when a team repeats, it is due to adjusting to the challenges of the next season.
Companies that continue to be successful are the ones that adjust to the issues in their field. Phones were connected by wires and TV programs were broadcast over the airwaves not that many years ago. Now phones are wireless and TV programs are broadcast over cables.
Smart phones that people carry in their pockets are computers that are more powerful than the room full of computers that took the first astronauts to the moon in 1969.
Keeping this in mind will help you regularly examine how you do business. This will allow you to be more efficient so you can spend less and increase your business's cash flow.
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God Bless your week!