There are times as a business owner when you feel like you're on top of the world, and other times when you're face down in the dirt wondering, "What the heck just happened?" It's inevitable that any business, big or small, will experience fluctuations in cash flow. There are too many factors that are not within our control to be able to constantly regulate a consistent stream of cash. However, there are things we can do to minimize the slide factor.
The illustration above shows a complete imbalance. Imagine your business as both of those little guys. The guy on the left is having his best year ever. Money is flowing in and he is busier than he has ever been. There is so much work that he can barely keep up.
Now look at the guy on the right. He was in the same position as the guy on the left just a few months ago. Business was so good and he was so busy that he couldn't see the point in continuing his marketing efforts. He thought, "Why spend money on promotion when business is already booming and I can barely keep up as it is?" But here's the catch: because he stopped marketing to his customers, they forgot he existed. Business slowly started to fizzle. Less work was coming in, but he was grateful to relax so he continued to ignore his marketing plan. By the time he realized how slow business had become it was too late. He was already completely off balance and heading straight for the bottom.
Despite his current position, he vows to rebuild and never let this happen again. He starts making calls, sending out promotions and networking with clients. He is scared because money is running out and bills are due so he pushes hard . . . really hard. Business starts to come in and he keeps pushing like a madman. He says to himself, "I'm going to get so much business that this will never happen again!"
A year later, he is lying face down again wondering what happened. He repeated the same cycle as the previous year. He pushed so hard for so long that he became burnt out. He let his marketing efforts slide for too long and ended up in the same situation as in the previous year.
So what can he do?
He needs to find a balance . . . a consistent marketing effort mixed with a consistent motivation to keep work coming in without letting it overwhelm him. Maybe he needs an extra employee. Maybe he needs to streamline his workflow. There are any number of things that he might need to do, but the key to all of this is that he consistently promotes his business to existing customers while simultaneously reaching out to new ones.
He needs his cash flow to look more like the next illustration.
In this scenario there are ups and downs but they are much easier to weather than in previous years. He has found the sweet spot. He has leveled his expenses and kept a consistent level of cash flow throughout the year. The marketing plan that he puts in place annually is followed closely and never stops. Business is good but not overwhelming, and some months are better than others.
Now he is balanced on top of the business seesaw, and able to adapt to fluctuations in the economy and changing trends in his industry because he has not allowed himself to get too far up or down on the scale. This may sound too good to be true, but with some planning, foresight, and diligence, the catastrophic scenario in the first illustration can be avoided and a more balanced work and cash flow can be achieved.