Playing penny ante poker with family and friends is primarily a social card game with a lot of talking and little paying attention to one’s cards. You win only if you’re lucky. No strategy involved. Raise the stakes with a different group and the chatter subsides. You check your opponent’s cards and are looking at your hole card more often. You also play a different game when you have a stack of chips as opposed to when you are just barely hanging in and about to be eliminated. The more chips you have, the more comfortable you are at taking a risk – like betting to an inside straight.
Operating a small business is a lot like a high stakes poker game. You need to pay attention by keeping score of what’s going on, not only in your business but also what’s going on around your business and in the marketplace. For instance, lose a major account or client and see how suddenly it affects your business bottom line. As the saying goes, “the cheese gets more binding,” or “it’s pucker-up time.” Guarantee you will be checking your hole card to see what happened and what your next move is going to be. Your stack of chips may begin to dwindle and you will be operating not from strength but more toward survival. You will need to come up with innovative ways to compensate for the loss.
We locally saw this happen when the big box stores came to town. Twenty-six businesses were affected when the first Walmart arrived. Some closed their doors, some hung on and a few changed their game plan and prospered. Are you ready for a similar threat to your business? Don’t forget, when you started, you stole customers from others, mostly competitors. When a “newbie” comes to town, he’s going to try to steal from your pot.
Are you watching every detail of your income and expenses? Because the difference in the two is cash flow. Here is a list of cash flow questions to consider on a monthly basis:
Are your Accounts Receivables current? Figure out how to get paid more quickly.
Is inventory turning timely? Get rid of the old and reinvest in new.
Are you controlling costs? Use discipline.
Are you undercapitalized? It’s the leading cause of negative cash flow.
Are you on budget? It’s the roadmap for avoiding cash flow problems.
Are you reviewing payroll? Maybe consider outsourcing or hiring temps.
Are you paying bills to your advantage? Take discounts; covet cash.
Pay your bills first, then yourself, then into a reserve for contingencies (expansion/emergencies/ future investments). Farmers call it “saving for a rainy day.” It works only if you instill the discipline to do so and make it a priority. Build your stack of chips. Keep score so you can operate profitably, with confidence, making smart positive decisions, being creative and being prepared for any major hits. More importantly, you’ll be HAPPY! QCBN
By Jerry Jones
SCORE Northern Arizona can play an important role in helping you keep score of your business. If you are interested in speaking confidentially with a SCORE Certified Mentor, or team of experienced advisors, you may call SCORE Northern Arizona at 928-778-7438, or visit us at northernarizona.score.org.
Jerry Jones is the president of SCORE.