Surprises are good but when they turn out to be the reason for your failure, they are no more than a devil that has arrived to suck out the blood in you.
Being an entrepreneur, you have many things to deal with, from maintaining the office, retention of the employees or making your clients happy with your service. But what if you are unable to focus on the most important factor that acts as the base to take forward your organization?
Yes, we are talking about the cash flow that most of the start-up companies just keep on less priority as they start spending and investing once they gain some profit. So if you are one of those, then here are some cash flow surprises that can bring in a great down-fall for your start-up.
>> Unintended expense
Being the owner you have control over where your money will be invested but you can never control the unexpected problems that life throws at you.
There are 100% chances that you face this challenge while you run a company, it could be anything like a sudden climate change, flood, destruction in some area of your infrastructure or a major customer complain that you have to pay them for your bad doing.
These situations don’t count when you have proper cash flow management, but in the other cases, these small cases do affect the cash flow.
>> Slow sales month
When you are into the business, working live in a field, fighting with your competitors to get the best of what could be gain to earn profits, you never think about the time when the market from which you are gaining profits might also get out of cash.
Yes, the slow sales month affects the market cash flow, which in turn can drastically affect the cash inflow bring your income and expense ratio down to get losses on your product sales.
No matter how much research you do to fight the storms in your business, it’s always better to maintain operating expenses of at least 2 months into your account to survive such situations.
>> More resources needed
The best policies that every smart entrepreneur adopts to gain profit is getting more work done from the lesser employees or resources. But what if the project you are working on needs someone who is an expert in that niche.
In such a situation you have no other option but to look up for an experienced person who can help you make the right decisions for your respective project to retain your client and keep the process on track.
This sudden increase in salary expenses can cost you by disturbing your profit margin.
>> Failure of high budget projects
Your cash flows work best when all of your clients are having a good service experience with you. What if a client gets upset and decides to leave your company by not continuing or taking service from the very next month?
You have a big loss to handle, right? What about your investments in terms of your employees time and effort, and also of the salary that you need to pay to them that was coming from that project, it’s all in vain. This is why predicted cash flow management is important, so before you sign your next project, make sure you learn some tips to cash flow management to apply them to your day to day business decisions.
>> Late payments from clients
Sometimes, the best and loyal clients can also delay the payments due to certain circumstances. Here the situation arises when you are gaining a profit but are still broke as the payment did not arrive at the expected time.
Such kind of situation leads to temporary cash crises and keep you in a position where you don’t have anything in your hands to work it out well.
>> New business expenses
As a start-up, there would be many things that you have to take care of, like the payments of the infrastructure, bringing in and developing new facilities for your employees, starting up training sessions for the company growth.
So in the initial stages, the only thing that your business needs as an outcome is a good profit amount, which would be re-invested for the further growth of the company.
Here the risk factor is what if the company doesn’t gain this initial profit to reinvest? Get serious if this is the case, you are surely going to be in debt.
>> Investors taking a back-foot
Getting an investor for your start-up is a great deal, but maintaining them is much harder than what it seems to be. You have to be on the top of your toes to show them your continuous growth and progress and make them believe that they have invested in the right place to gain their profits.
Once your investors deny to help you, you have no supporting hands left to save you from a big fall.
>> Overestimated output
Sometimes when you start a project or when you look at the exceptional output (in terms of product) that your team has given, you forecast to earn great profits from it. But remember, not all who look interested will buy a product.
Holidays might give you more sales, but you can’t expect the same in the normal days and start calculating the profit margin based on that. The overestimation you make as a result will affect the overall decisions that are to be made based on the outcome of the sales. So better optimize your expectations based on your historic data before jumping into the conclusions.
>> Change in the market trend
The market doesn’t work on the bases of the products that you design in your company, it works on the customer’s needs which changes based on the changing trends. The customers always want the things that are new and are largely accepted by the world, but these things are not steady, they keep on changing.
So for the newbies like you, if you want to run equivalently with your competitors, you have to be continuously coping up with your competitors. As your lack of market knowledge can bring in more losses then you could expect.
>> Piled up past payment overdue
The worst thing that a company owner is not paying attention to past payments. By delaying the payments you are increasing the amount to be paid to them that are the result of the interest amount that gets addon with the passing time.
This is the worst thing that you should do, as these small amounts will, later on, will get piled up into a mountain of pending payments that are increasing with every second.
>> Wrong investments that led to the loss
The one thing that can make or break a company is the decisions that the company owner makes, weather its in terms of money, investments or taking up new projects.
Partnering up with the wrong people, investing the earned profit in the area that resulted in the complete failure will waste the money waste of your money. But do understand, dealing with wrong or right person is completely the game of luck, you always have to take this risk until you learn to identify the way to work these things out.
Cash flow problems are one of the most crucial issues that most of the business owners go through. But staying alert and keeping a check on your expenses and decisions can save you from the potential pitfalls. Dealing with such situations becomes easy when you have an expert hand on your head to guide you to walk in the right direction. So start preparing yourself for the above cash-flow surprises to get some realistic and achievable solutions for your start-up.
James Vargas is an experienced business expert, consultant, and manager at Get Everything Delivered, a business consultancy service. He has 1.5-decade corporate experience and is tailoring the best project delivery practices to the start-up owners based on his knowledge to solve start-up business problems to great revenue for their business.