In a survey by SunTrust bank, business owners were asked, "How will you fund growth next year?”  More than two thirds said they would use existing cash flow and profits.  The balance planned to use loans, bootstrapping and personal investment.  Most businesses will only go as far as their cash flow will take them because they are self-funded.  Healthy and positive cash flow is essential to achieving success in any business regardless of how you define success - rapid growth, a valuable business, having a job you love, or the freedom to work for yourself.  Cash flow is the "lifeblood" of a business, the single most important measure of your company’s health, and the key ingredient to growing the value of your business assets.

So how do the best performing companies stretch their money so they are able to achieve their business and personal goals?

In general, we see that business owners who are able to find the extra investment capital they need to achieve success are doing three things very well:

1. They measure, manage and forecast cash.  Profits are not the same as cash. You have to measure cash flow, and if you’re really good you will forecast cash out 30, 60 or 90 days. 
2. They extract additional investment capital from existing cash flow. Successful business owners are able to stretch their money and minimize external capital, by employing a variety of ways to conserve cash for investment purposes.
3. They create a capital plan.  Successful owners decide how much capital is needed to achieve their business objectives long before they need it and then put in place a plan to obtain capital on favorable terms.

Why do business owners feel that cash management is such a difficult issue?   Having enough cash is one of the most frequent causes of insomnia for owners – making payroll, funding new contracts, purchasing business equipment for growth opportunities are all directly impacted by success with cash flow.

• Owners like control.  Since only 15% of business owners in the above SunTrust survey borrowed money to fund growth, it is clear that many companies lack the extra capital to invest in people, technology and systems that can ultimately create leverage, growth and business success.
  

• Sweat Equity is not Capital Planning.  Many owners work very hard on their business, but there generally comes a time when additional outside cash will make the difference between an under performing business and a “gazelle” that can take advantage of new opportunities.

• It is hard to measure and forecast cash flow.  It’s easy to track basic revenues and net profit, but cash flow is the true measure of business success.  It takes time, skill and information to measure, manage and forecast cash flow regularly.

• Most business owners are not accountants.  It takes financial skills, experience and resources to manage cash flow.  Most companies don’t have CFOs, and the business owner has not identified resources to help with this most crucial task.

One solution that top performing companies explore is a highly experienced B2B CFO ®.  Hiring an affordable part-time CFO can immediately focus the business on cash flow management and allow the owner to focus on sales and customer service. 

For more information and a complimentary analysis of your company, call David Kirkup, B2B CFO ® partner on 404 348 0326 or dkirkup@b2bcfo.com.

Source: SunTrust Bank survey of 530 business owners.