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09/18/2012

Is Your Company Constantly Facing Cashflow Problems?

According to David Birch, a gazelle is a company that has a minimum of $100,000 in revenues and manages to grow at least 20% over a four-year period. Only 3% of all companies have accomplished this demanding task.  Birch, who is credited with hatching the notion that small rather than large companies are the engines of job creation, says that a small company views profitability as variable and quite manipulatable. But cashflow is a constant issue because of fixed (payroll) expenses and overhead.

Positive cashflow equals business survival. But not all cashflow is due to good management, and not all of it will help you survive either. Accordingly, if you find that you have extra cash at the end of the month, follow this five-step strategy:

  1. Determine the source of the your positive cashflow.
     

  1. Project future cashflow.
     

  1. Establish priorities for the cashflow.
     

  1. Research viable strategies and opportunities to generate more cashflow.
     

  1. Choose the best strategy for your business and stick with it. 

After all is said and done, positive cashflow comes from only four sources: new debt, new investment, sale of fixed assets, and operations.

The first three are limited. So if the fourth source, operations, doesn�t kick in, then sooner or later your creditors pull the plug.

Make it your goal to go after one of the best sources for new cashflow � working with your trade exchange counselor to cover more of your company�s business expenses with trade dollars.

David Birch has a degree in applied physics and engineering from Harvard. He spent his early career at NASA, working on the Hubble Space Telescope and the Mariner space program. In 1983, Birch started Cognetics, subsequently rechristened Arc Analytics � a research and consulting firm in Waltham (MA).


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