7 EASY STEPS TO CASH FLOW SUCCESS

Denyse Whillier

CHECK

•  Workbook •  Cash flow forecast •  Price calculator

CONTENTS

•  Threesimplestepsyoucantakerightnowtoincreaseprofitswithoutspendingafortuneonmarke8ng.

•  Thesupersimpleformulathatwillensureyoupriceyourproductsforprofit.

•  Thekeyfinancialmetricsyoushouldwatchlikeahawk•  Howyoucaneliminatefinancialstress,experiencedby45%ofbusinessowners,onceandforall.

•  Whatyoucandotoputyouincontrolofyourcashflow.

TWO QUICK POLLS

•  Tick ‘yes’ or ‘no’ •  Have you had to deal with cash flow

problems in your business?

•  On a scale of 1-5, with 1 being low and 5 being high, what’s the highest level of financial stress you’ve experienced?

7 STEPS TO CASH FLOW SUCCESS 1.  Understandingwhycashflowisso

important.2.  Prepareacashflowforecast.3.  Avoidthetopcashburningtraps.4.  Priceforprofit.5.  Fivewaysyoucanincreaseprofits.6.  Manageyourpayableswell.7.  Watchyourkeybusinessmetricslikeahawk.

CASH…

…islikefueltoacar.Ifacarrunsoutofpetrol,itstopsworkingun8lit’srefilled. Cashkeepsthebusinessrunning,andmeanswecanpayallourexpenses.

CASH IS NOT…

…. The same as profit.

9 REASONS WHY…

… Cash is not the same as profit.

CASH…

…Really is King!

A CASH FLOW FORECAST

Islikethepetrolgaugeonyourcar.

Itwilltellyouexactlyhowfaryourbusinesscantravelbeforeitneedstofillupagain

EXAMPLE 1 January February March

BeginningCash £10,000 £6,000 £5,000

CashIn £3,000 £4,000 £10,000

CashOut £7,000 £5,000 £5,000

EndingCash £6,000 £5,000 £10,000

EXAMPLE 2 January February March

BeginningCash £10,000 £6,000 £1,000

CashIn £3,000 £0 £0

CashOut £7,000 £5,000 £5,000

EndingCash £6,000 £1,000 -£4,000

2 GOOD RULES OF THUMB

•  Unlessyoursisacashbusiness,assumeatleasta30-day8melagbetweenwhensalesarebookedasnetrevenueonyourP&Lreportandwhenthesesalesconvertintocashonyourcashflowforecast.

•  Assumethatonly90%ofrevenueloggedonyourP&Lreportwillconvertto‘cashin.’

GAS GUZZLERS TO AVOID

ANOTHER RULE OF THUMB

Fixedexpensesshouldbekeptat20%ofnetrevenueandvariablecostsaroundthesame

level.Thiswilldependontheindustryyou’reinandhowlongyou’vebeenopera8ng.

YOUR MANTRA FOR TODAY

•  COGS plus 45% •  COGS plus 45% •  COGS plus 45% •  COGS plus 45% •  COGS plus 45% •  COGS plus 45% •  COGS plus 45%

THE 5 LEVERS

1.   Leads:Thetotalnumberofpeoplewhohavecontactedorwhohavebeencontactedbythebusinessoverthecourseofayear.

2.   Conversionrate:Thepercentageofpeoplewhoactuallymakeapurchase.

3.   Averagevalueofasale:Theaverageamountpersale,es8matedoverthecourseofayear.

4.   AveragenumberoftransacEons:Thenumberofpurchasestheaveragecustomerwillmakeoverthecourseofayear.

5.   Profitmargin:Theprofitpercentageofeachandeverysale.

THE MATHS BIT!

LeadsxConversionRate=Customers

CustomersxAverageValueOfEachSalexNumberofTransac8ons=Revenue

RevenuexProfitMargin=Profit

WITH SOME REAL NUMBERS

4,000leadsx50%conversionrate=2000Customers

2000customersx£50averagevalueofasalex2

transac8onsayear=£200,000inrevenue

£200,000revenuex40%grossprofitmargin=£80,000Profit

NOW IMPROVE BY 10%

4,400x55%=2420Customers

2420x£55x2.2=£292,820Revenue

£292,820x44%=£128,840.80Profit

GET ORGANISED

WATCH LIKE A HAWK

WEEKLY

•  Numberofnewleads•  Numberofnewcustomers•  Conversionrate-%•  Totalsales•  ‘Cashending’•  Totalmoneyowedtothebusiness

MONTHLY

•  COGS•  Grossprofitmargin-%•  Netprofitmargin-%•  %ofmarke8ngspend•  Costofacquiringacustomer•  Theaverageamountof8meittakesforacustomertopaytheirbill

ACTIONS •  Whichothermetricsshouldyoutocheck(a)weeklyand(b)monthly?•  Establishabaselineforthesekeymetricsnow.•  Prepareacashflowforecastforthenext12months.•  Schedulea8meeverymonthtoreviewandupdateyourcashflow

forecast.(Weeklyifnecessary).•  CheckyourBalanceSheetweekly.•  CheckthatyourpricingatleastmeetstheCOGSplus45%hurdle.•  Setanimprovementtargetandac8vatethe5levers.•  Reviewyourfinancialmanagementsystemsandimplementanynecessary

changes.

CONNECT WITH ME

www.denysewhillier.com denyse@denysewhillier.com And: LinkedIn Twitter Instagram