Free eBook from Truby Achievements, Inc.
5 Ways to Increase Cash Flow, Profit, & Growth
“No matter how meaningful your mission, you still need to fund it!”
By Bill Truby, M.A., MFT
President & CEO, Truby Achievements, Inc.
– First 2 Sections of eBook –
Part 1. Introduction
Let’s be honest…
Though you may want to make a difference in the world, fulfill a mission, or achieve a life-long dream, THOSE reasons for your endeavor are the higher level, more conscious aspects of your business.
But what all business owners want, indeed NEED, is money – to exist. Without it, no dream, vision, mission, or value can be achieved.
I have a very good friend, Melody, who, at the time of this writing, recently opened a shop on the main street of an alpine town. It’s a quaint town with a seasonal tourist trade. It also is an idyllic place to call home for those who choose mountain style living. My friend’s ONLY reason for getting into business was to offer something special to the community. She wanted it to be a gathering place, a welcoming place for all beliefs and perspectives, a spiritual place of peace and harmony. It was her passion. It was her focus. It was her excitement.
But Melody is stressed.
Her business model is not generating enough cash flow to pay the rent. Her noble cause and focus has been supplanted by survival. Others, who see the vision, are verbally supportive and enthusiastic, but they aren’t voting with their credit cards. I hope she makes it. But she is faltering.
Have you been in this state? Have you felt this anxiety? I have. And I’ve seen it in countless small firms I’ve worked with over the past forty years.
If you share this experience of struggling to get the money you need to survive, you’re in the right place. This article is designed to help – and to do so quickly.
It’s no secret, money is the lifeblood in the business body. It is NOT the purpose of the body. It is the flow that allows the body to fulfill its purpose. It is a universal need! No matter if the body is one of an athlete trying to win the gold medal, an astronaut at NASA, or a self-sacrificing “Mother Theresa” type – all need blood flow to make their life a reality. Without it, life ceases.
It’s the same with a business. No matter the offering, product, service, mission, vision, or goals – without the flow of money, the life of the business is dead. And this remains true no matter if you are looking for a cash flow of a few hundred dollars, a few thousand, a few million or a few billion. The dynamics remain the same. Without enough money/blood to flow through the body/business – it dies.
Let’s drill down to a deeper understanding of a business owner’s psyche. What do all business owners want? I will share with you the psychology of their desires and reveal how, typically, their initially articulated “wants” can get supplanted by the need for money.
Why the Necessity of Cash Flow, Profit, and Growth is at the Heart of a Business
You may be a landscape architect, an attorney, a carpenter, a mechanic, a baker, or an expert in offering some service. You’ve gotten to the point where you say, “I want to have MY own business instead of working for someone else.” You’re good at what you do. You believe in yourself. Others believe in you too. So, you take that exciting, fearful step to start your own business.
Or, you buy a business. A clothing store, a hardware store, a gas station, a grocery store – some enterprise that became available, caught your eye, and sparked your excitement to own it. You see how that other restaurant, furniture store, or boutique is doing so well and figure you can be successful, too.
Maybe you’re a seasoned employee in a larger firm, one with a long history. You’ve been working for, and finally have been invited to be, a partner. A principal in the firm. You’re ready to have a voice. You’re ready to contribute. And you now believe you are positioned to get some reward for all your hard work. You get to share in the financial success of the company and don’t think much about the possibility of a cash call from the partners if things go south.
Initially, there is an intense amount of excitement for the new business owner. I’ve seen it many times. They hardly sleep at night. And when they do, their nightdreams reflect their daydreams about customers or clients buying their product or hiring their service, while they make a boatload of money. They see the business flowing smoothly, life going easily, a lot of personal satisfaction, and raking in enough money to have financial freedom.
But it often doesn’t turn out that way quickly. These rewards are typically found after walking a long and difficult trail. And it takes a LOT of work, with inevitable ups and downs.
Very quickly, the new business owner experiences the overwhelming urgency for cash. Expenses have a way of flowing in like a tidal wave, while sales begin with a trickle. The need for money can become all-consuming.
Does your business feel more like a drain than a dream?
When businesses don’t learn to implement a good business plan with the five action items I’ll reveal in this eBook, they can get stuck at this stage – ever battling the wave of expenses by constantly trying to get more sales. Owners, especially owners of small to medium-sized businesses, feel like they are in business to support the business. Their personal life comes second. If they have employees, owners can resent how staff always get paid, even if they must borrow to pay them. The business feels more like a drain than a dream.
I heard Deepak Chopra once say, “There are only two types of people who worry about money, those who don’t have enough, and those who have too much.”
He’s right, though I’ve personally dealt with more companies in the former situation than the latter. Lack of sufficient income seems to be a consistent reality in small to medium businesses. And it continues to be a worry for any business that hasn’t turned the corner into abundance.
I’ve seen multi-million-dollar businesses have the same stressors and needs for money that a startup business has. Why? They’ve never matured to be a smooth operating, profitable business. They haven’t found the secret to implementing basic dynamics that create an attractive business, one that compels customers to buy their product or service. Instead, they go for the profit-promising, ever-changing, sales strategies that bring in more revenue by chasing new revenue.
Now…what happened to the excitement and reasons for getting into business in the first place? As I said earlier, it got supplanted by the need for money. Using the same analogy as earlier, that of money being the lifeblood of the business – the initial excitement got replaced with survival needs because of blood loss. It’s hard to think about that cruise you want to take when your body is bleeding out.
Is there a solution? There most definitely is.
First, it’s important to realize the simple dynamics of the analogy above. You must have healthy blood flow, and when you do, you can do anything. Fulfilling your dream and vision while the company runs effortlessly is certainly achievable – but only AFTER you master healthy financial processes of cash flow, profit, and growth.
This is how it looks graphically. The wants and needs of a business owner start at the left and move to the right, with operational ease and personal satisfaction, the initial desires, trailing after there are healthy financials.
When I developed this lineup, I noticed an interesting fact. These business needs can only be fulfilled sequentially – from left to right.
The only way you can have profit is after you have sufficient cash flow. Then, growth can only occur after you’ve figured out a formula of selling “X” amount of widgets that result in “Y” amount of profit. THEN, when the financials are flowing, the owner can focus on methodologies to streamline the business and create an ease of operations.
Finally, after cash is flowing, some of it retained in earnings or profit, the company is sustainably growing, and there is an ease of workflow that doesn’t demand constant attention – THEN, the owner can step back and reap personal reward and satisfaction.
For You Who May be Offended by Focusing on Money….
I realize, some people take offense when I place this much focus on money being such a core want or need. I know I did. My life purpose is to make a difference in people’s lives. In fact, I have proactively taught, “You can make more money if you have a purpose that is profitable, than if profit is your purpose.”
Nevertheless, I have realized over time, sometimes ANXIOUSLY realized, under the meaningful pursuit of a purposeful mission, there is an absolute necessity to fund that purpose. In my youth, I was a part of a self-supporting ministry. Though we were passionate about what we did, we were constantly consumed by the need for donations.
A good friend of mine, the CEO of a HUGE nonprofit medical enterprise, continued to champion the statement, “No margin, no mission.” He realized that non-profits need money to make their operation possible. He encouraged his people to be financially aware and frugal as they carried out the mission of the company.
He knew, when there isn’t sufficient funding, THAT reality becomes an all-consuming, constant worry. Anxiety about finances crowds out the joy of fulfilling the mission. PLUS, it distracts people from doing the best day-to-day work they can do. No margin, no mission, no methods to succeed.
Never was this so apparent to me than when a critical care unit in a for-profit hospital, centered in a small town, had to shut down because of a lack of funding. Before this, the unit and the staff found deep fulfillment and tremendous satisfaction in caring for these patients who were going to be in these beds until they passed away.
It was a heart-rending, supremely sad experience to see the care staff and families of these critical care patients have to be turned away to try and find another facility. There was no other facility in this small town, so the families had to search for places more than an hour away. What a horrible situation – all because of a lack of money.
So, don’t get put off by acknowledging this basic need for money. It’s necessary. No different than needing fuel in your car. The type of car, quality of its engine, expertise of the driver, or even the desired destination; all are nothing – if there is no fuel to operate the vehicle. Your business, no matter how noble, needs fuel, too.
Part 2. The Science of Financial Needs
Now, before I share with you the five ways to increase cash flow, profit, and growth, I believe it is helpful to informally discuss the scientific basis for each and understand the underlying reason for each. This understanding will help you better understand how to implement the five action items I’ll reveal later in this eBook.
Cash Flow – A Necessity
Capturing cash, for ALL organizations, is truly a necessity. It’s not just a “want.” That’s why you hear statements from business gurus like, “Cash is King,” or “Money is the lifeblood of the business.” Simply put, without money, no organization can exist.
And that’s a core reason why business owners want it. I know, all too well, what it feels like to be trying to get a business off the ground when there isn’t enough cash flow to pay expenses. It is STRESSFUL!!
Let’s think about this in the context of a bakery opening the doors for the first time. A husband and wife, John and Sarah, are both creative bakers who make delicious bread, pastries, and an assortment of other items. They LOVE to bake and feel deeply fulfilled when someone enjoys their baked goods.
They know what it’s like to watch someone take a bite of one of their rich and flakey crescents, close their eyes, and savor the flavor with an audible, “Mmmmmm.” It brings a smile to John and Sarah that would brighten a darkened street. They know, if they can open a business and do this on a daily basis, they will be fulfilling their purpose.
This is why they decided to open the business.
But on opening day, no one came walking through the door. They waited all day. Still no one. Their attention gets diverted from baking to bewilderment. “What did we do wrong? Is it our location? Our advertising? Our signage?”
Customers trickle in during the next few days and weeks. The enjoyment of watching these few customers enjoy their products is profoundly overshadowed by the realization, “We’re not selling enough to pay this month’s rent!” And in so thinking, they crash headlong into the first basic need all business owners have – cash flow. “We need to increase sales!” becomes the pressing NEED.
We can leave the analysis of why this was a weak start-up, or even what the fix might be. I use this bakery business illustration to simply drive home the point – cash flow is the first and foremost need all business owners have. Granted, it’s not obvious until it’s not there. But it’s still the first business success element that must be met – sales that generate cash.
What happens when there IS adequate cash flow, and that first need is realized? Then the business owner wants to start keeping some of the flow in the form of profit.
Cash Flow First, Then Profit
If there IS sufficient cash flow, an owner can rest easier, and the second need rises to the forefront. Now the owner wants to start keeping some of the money that’s flowing through the business. That’s called “profit.”
The amount of possible profit varies by industry, type of company, size of the operation and the efficiency of the company’s processes. But it’s always a percentage of the cash that flows through the company.
Hospitals are lucky to make 1% profit. Hardware/building supply companies make an average of 2.9% to 7.4% depending on the size of the company. A restaurant’s net profit can be from 3% to 7%. Jewelry, clothing, and cosmetic stores can make significantly higher margins.
As a company siphons off a bit of cash flow to retain as profit, they feel more successful. However, I’ve seen companies compare THEIR profit percentage to industry standards and be “ok” if they are in that ballpark. But that can limit their potential by using the industry-standard number as their calibration point. What is true in the industry may NOT be the limit for you.
Mike’s hardware/building supply was doing well…by industry standards. But when he put our Business Success Model into practice, ALL the wants and needs I’m talking about in this eBook were not only realized and achieved, the profit margin, specifically, sored well above industry standards. Mike experienced surprise and pleasure as he was able to reinvest in the business with these additional profits to make it even better.
I tell you this because I’ve seen too many times, an owner calibrates his or her success by industry standards instead of looking at potential. I believe the industry standard metric is good for consideration, but should never be seen as a limiter. I’ve seen restaurants, retail stores, professional services firms, and construction companies – all increase their profits significantly. And I mean SIGNIFICANTLY! Well beyond industry standards. 5, 20…sometimes 50 to 100% increases in gross margin.
The key here is to not get STUCK by what industry standards tell you. Blaze your own trail. I’ll show you later how to do it in the 5 ways to increase cash flow, profit and growth.
After Profit – Growth
Once an owner learns to capture cash by increasing cash flow and begins retaining profit, the next need is growth. And it only makes sense.
The owner reasons, “I make X% profit on Y% sales. If I can grow to increase my sales to Z%, especially if my overhead stays relatively the same, I can increase my cash flow and profit even MORE!”
And that owner is right! But growth has another application in the science of success. Sustainability.
“Growth” is actually a law of life and success. If something is not growing, it is declining. No matter what we are talking about – this truth applies. Think of a garden, a child, a relationship, the economy, or the ability to perform any service (surgery, carpet cleaning, accounting) – if it is not growing – either by getting better or bigger – it is destined to stagnate, then eventually decline.
I saw this dynamic reveal itself in my son, Brandon’s, business. He was the top mechanic at a Dodge dealership in our county. Well respected. Looked up to and sought after. But he realized the limitations of being an employee.
So… After much soul-searching and planning, he fearfully bought his own mechanic’s shop. Because of his reputation, honesty, ethics, and abilities, he quickly had a waiting list of customers. Cash flow was instant. Profit was abundant.
profit But he was working to his capacity. It took his entire capacity of energy and time to top out at $5,000.00 gross sales each month. He ran the numbers and realized he could significantly increase his cash flow and profit by adding another mechanic – by growing. He hired someone. During his first month, by adding a new employee, he doubled his cash flow – which, of course, dramatically increased his profits. After all, his fixed overhead stayed the same.
Brandon saw how much “growth” could benefit the business. He bought and installed three more lifts. Hired two more employees. And now, personally working less hard, he makes $40,000.00 to $50,000.00 a month in gross sales. He easily realized the first two needs of cash flow and profit, were leveraged AND sustained by growth.
I’m sure you can see the logical progression of needs by now. Cash flow first. Then the company must retain some of the cash in the form of profit. Thirdly, growth allows the owner to leverage the cash flow, and profit to even higher levels, and actually become more sustainable.
As I was writing this eBook, I saw my line of thinking confirmed by a television show. Shark Tank. It’s a reality TV show where business owners pitch their products to billionaires. They are trying to persuade these wealthy, well-known people to invest in their company.
I noticed a pattern. The potential investor always had the sequence of questions as they considered the pitch.
- “Do you have sales?” (Cash flow)
- “Are you profitable?” (Profit)
- “How do you plan to scale your business?” (Growth)
I was fascinated to see how they always ask these questions in this order, the same order as the spectrum of needs I’m sharing with you. If the answers were favorable, they deemed the business successful, and therefore investable.
Now, if you have a healthy amount of cash flow, profit, and growth, you’ve made it. Right? Not so fast.
There is more to a business, and to “life” for that matter,” than just money. When you get sufficient cash flow, profit, and sustainable growth, you now want to improve your quality of work life. After all, most people spend the majority of their waking life at work.
Interestingly, the desire for operational ease was never seen as a “necessity” as I worked with companies. It certainly was a “desire,” but it fell between fulfilling the financial needs, and the desire for personal satisfaction. Thus, it’s placement on my spectrum.
However, though it is not an “initial” need, it becomes crucial over time. If the business isn’t operating with a smooth workflow, it’s an indication that something is off – which undoubtedly will affect profit and growth, at the least.
Operational Ease Perpetuates Healthy Finances
Operations fuel the cash flow, profit, and growth, of the company. The efficiency with which work is conducted can capture cash…or drain it if there is inefficiency. It may be obvious at this point, but often not addressed until there is sufficient cash flow, profit, and growth.
But there is another reason a business owner wants operational ease.
At this point, when the fear of survival has lessened, an owner wants the business to become more self-sustaining. They are wary of dealing with the day-to-day hassles of operating that business. Partners, staff, customers, vendors, regulators, and more… all can create a never-ending tide of questions, problems, performance failures, and difficulties that drain time, energy, and resources.
I’ve often been called in to help a company “enhance their success,” as they put it. They are “ok” with their success but wish it could be obtained with less injections of personal time, energy…and money, “that could be better spent,” they say. They want the businesses to operate more smoothly, without constant oversight and handholding.
And it must!
IF the business is to be ultimately successful and sustainable, and continue to grow, it must become a smooth operating machine. If it’s not, it affects the first three financial needs. Cash flow, profit, and growth rise in direct proportion to the efficiency and effectiveness of operations. Conversely, there is a lot of waste and loss in the three money pieces if operations are clunky.
Operational ease, then, is a two-headed need. It helps the business be more sustainable, AND limits the amount of managerial oversight needed.
A small environmental engineering firm had two owners and 14 employees. They were successful and had a healthy financial picture of cash flow, profit and growth. But they weren’t at their potential. Turns out, the operations of the company was the limiter. Instead of the entire enterprise working together in smooth coordination and collaboration, each component and individual was being directed by the two owners. Clearly burdensome for the two owners and inefficient in the operational practices. When they build a better operational infrastructure, the owners were able to step back and watch the work processes flow more smoothly.
After the first four needs are fulfilled, the owner can wipe his or her brow, sink into a comfortable chair, and focus on acquiring personal satisfaction – the reason the business was started in the first place.
Let me emphasize that for a moment. Whether you are a person who has started or purchased a business, or someone who has become a principal in a large firm, you have probably not gained the purchase or promotion as the end goal. You want that ownership to reap a reward for you – financially, personally, and professionally.
When the basic financial needs are achieved, leading to an effort to obtain operational ease, then an owner can focus on getting personal satisfaction. And that’s the good news because that’s probably a large reason the owner got into business in the first place.
Personal Satisfaction – Finally Realized
Now we come full circle. An owner had an initial reason to get into business or seek ownership in a larger firm. It was primarily personal in nature – pride of achievement, personal purpose fulfillment, and financial reward.
Up until now, you had to “pay your dues.” But now you can return to the original dream and get a return on your investment of time, energy, money and strenuous effort. You can finally get a return on all the investment of financial and personal sacrifices you have made.
Yet, similar to the dynamics of “operational ease” and its reality tied to financial health, if you CAN’T get personal satisfaction, it typically means something is amiss.
The situation looks like this: Without healthy cash flow, profit, growth, and the operational ease to make the financials sustainable, the owner suffers. Work/life balance diminishes. Personal resources of time, energy and money are drained. Health and well-being erode. The owner feels like he or she is in the business to support staff and customers. Customers and staff get all the benefits while the owner has to compensate for any loss or deficiency.
But, now that the finances are healthy and there is an operational infrastructure that can sustain that health, owners can turn their attention to a more personal achievement – that of personal satisfaction. They can experience personal rewards, the ability to step back, enjoy the pride of achievement, and live a richer personal life.
And, from my perspective, it’s an absolute pleasure to see owners get their just reward…finally.
How is YOUR Business Doing?… An Informal Assessment
Some thought questions and assessments for you to think about you and your company.
1. Is your cash flow sufficient to pay your expenses and have a profit left over? If not, how much gap is there? If there is a significant need and gap, how long has it been going on? (If a few years, it suggests a systemic problem, not just a lack of sales).
2. Is your net profit aligned with industry standards? (Though remember what I said earlier, our Business Success Model can make your percentage profit be higher than industry standards).
3. Look at a previous time period (Say, the last three years?) – are you growing? Is your knowledge and expertise improving and maturing?
Do I Want to Read the Rest of this eBook?
(…You’ve only read 2 of 5 sections from the eBook)
Typically, when a business owner thinks about getting healthier financials, he or she turns to sales strategies. The saying, “you’ve got to spend money to make money,” comes to mind. So, they hire sales consultants, buy marketing packages, and follow the promises that THIS is the method that can make you lots of money. Yet, I see too much money lost to these efforts with no real return on the investment. There’s a better way.
The training you’ll get when you read more and learn about the five ways to increase cash flow, profit, and growth costs you nothing. It’s just a different way, a better way, to build a business infrastructure that creates sales, prevents loss, and leverages profit margins. Then, when sales do increase, they tend to gain a momentum of their own AND you have the systems and tools in place to keep more of the income as profit.
Incidentally, that’s the “secret sauce” of all Truby Training. We don’t give you a “program” or more things to do. We simply show you HOW to do what you are already doing – differently. Like showing you how to stop pushing on a door with a sign that says, “pull.”
What you will learn as you read more…
- Five simple ways (that cost you nothing) to increase cash flow, profit, and growth even if you don’t have increased sales.
- How to instantly stop the numerous ways cash is lost in most businesses every day.
- Learn how to manage your people and process in a way that prevents loss and increases your income.
- Understand how to use efficiency systems that affect income, expenses, and growth.
- Discover the one element that can make your business compelling and attractive to customers.
Download the complete 53-page eBook – 5 Ways to Increase Your Cash Flow, Profit, and Growth
Meet Bill Truby, Our Training Expert
CEO and Founder of Truby Achievements
Bill Truby, M.A. MFCC, is a psychology and business-trained consultant, speaker, author, and educator whose focus is on improving the quality of human fulfillment and performance in organizations. His clients include architectural, engineering and related design profession firms; manufacturing companies, dental and medical offices, hospitals, wineries, insurance companies, schools, churches, health clubs; and various product, service, and sales organizations.
Bill’s work includes consulting for goal setting, team building, strategic planning, management transition; and training in leadership, communications, sales, delegation, motivation, and other organizational skills. Truby Achievements has now taken their experience working one-on-one with businesses of all sizes and created an online version of their proven business system to help even more people.
Truby is a popular speaker and workshop leader for the American Society of Landscape Architects, the Professional Services Management Association, the American Society of Association Executives, the Society of Architectural Administrators, California Association of Hospital Admission Managers, and the American Institute of Architects.
He has worked extensively throughout the United States as well as Australia, Singapore, Thailand, and Hong Kong. Bill has a Master’s Degree in Psychology and has been teaching personal, interpersonal, and organizational success strategies for the past 30 years.