C.R.E.A.M.

Recently I just finished reading " How To Speak Money " a book by John Lanchester, worth adding to your library. He goes through the A to Z and under C was C.R.E.A.M.  It is  a song title by the Wu-Tang Clan.

It stands for Cash Rules Everything Around Me and with everything thing happening in Greece,the Chinese stock market and stagnant economies around the world, my brain started running and thinking about the small business owner and entrepreneurs and their relationship with cash.

It may seem odd in the digital money globe we live in to be talking about cash. But cash still rules . . . he who has it rules. Without a healthy cash balance you are robbing Peter to pay Paul, with the good possibility your sales are only servicing your debt i.e. loans.

While this in and of itself is not a bad thing, it limits you. Not having a healthy cash balance will inhibit your ability to do what has to be done to improve your business. It means looking for another loan or extending current facilities to enact the changes you desire.

This will increase your repayments, meaning more of your sales going towards servicing debt, at a healthy interest rate. This has the potential to suck away your passion, when you realise you are going to work to service debt. Creating the feeling of Groundhog day.

Let's go back and look at the fundamentals, Sales, Costs and Profits.

1. If your sales are good, but costs too high your profits will be minimal or nil.

2. If your sales are low and costs too high, your profit turns to loss.

3. If option two continues there is a good chance of your loans being called in. Not good.

Everything returns to your sales and cash balance. Are you selling at the right price and correct profit margin, to cover your costs and make a profit ? Have you got a product or service that may not currently be a big seller, but has great margins ? You do, great, time to look at increasing their sales.

Another area to look at and this is a tough one ... are you selling to the right customers ? You may believe you have the right product and found your ideal customer, but sales are still a struggle. This is a good time to think about who you are selling to and is there anyone else in the marketplace you may have overlooked. Sometimes it may be someone in the middle of the purchasing chain who are you real customers, not the original one at the top or bottom of the chain, you identified.

Imagine a big weighing scales, Your sales on one side and costs on the other. To tip the scales in your favour, sales must be greater than costs. Time to get creative on who your ideal customers are. Without cash, it can be hard to move forward, not impossible,just challenging.

Make your life easier and remember Cash Rules Everything Around Me

Colin Myles
Author & Listener

P.S.
" Your customers are tuned into W.I.I.F.M , what's in it for me, are you broadcasting ? "

Author ; How to Avoid Business Failure