Repairing the Boat to Keep More Treasure: Cash

Kids Bailing Water from a DinglyJune 5th, 2013 was a dark day and stormy day because unforseen waves crashed upon our deck. We were told to vacate our current premises. This news came without a warning shot over our bow, but it struck us right in our hull and threatened to sink my business. Also, six months earlier I used all cash reserves to close a second location that just wasn’t developing as planned. It took a lot of courage, self-reflection and discussions with friends, mentors and family to discover that I really didn’t want to abandon ship.

For various reasons including my only employee leaving the initial blow was 40% of revenue! Without cash I was taking on water fast and was having a great deal of difficulty making payments to our accounts payable. My only option was to stay strong in mind and keep renegotiating with my vendors by letting them know our challenges and that I knew it would turn around.They understood and were patient because they also respected my integrity.

Thankfully, we were able to quickly find an independent fitness studio to operate out of. The studio owner also showed me a 900 square foot open clinic space in the same building which I could lease for the treatment room and business growth. After a few tense weeks I was able navigate through the murky waters of the district’s business licence rules to land my own clinic space. Finally my own island! A month of zipping upstairs to renovate between clients and weekends labouring my private oasis was open to clients on August 1st, 2013.

There were times when my faith wavered, but I knew that my business was one worth keeping and rebuilding. I also knew I had most of the necessary skills to repair the ship. The skill missing to keep more of my treasure was cash management. After reading several books on cash flow management I stumbled across Cash Flow Management Mojo by Sandra Simmons.

Most of the information I found on cash flow management didn’t really explain how to build in cash reserves for growth, taxes and emergencies while others were too complicated or did not link budgets with sales goals while Sandra’s software and book do. Tired of bailing out water with a small bucket I started to attend a bi-weekly business mindset group where we set three levels of two-week heart centred profit goals – achievable, stretch and outrageous.

Learning cash flow management is much like learning a trade. With some trepidation and optimism I signed up for the cash flow management mojo software online. Many fitness and rehabilitation entrepreneurs are excellent practitioners but like myself also lack some key business skills. It took me six years to figure out how to manage with cash.

Who knows better how to manage cash than Warren Buffet? He buys businesses with cash on hand and believes that the majority of growth should be cash-based. Warren Buffet is also keen and trimming any excess costs. I took a look at our expenses to trim so of the fat. Something to do every 3-6 months so that costs don’t get go overboard. In two weeks our vendors were current a month before my goal. Two weeks later the cash was available to invest in an iPad, a tool to enhance our services that I had been eyeing since 2010!

Sleeping on a log

Each week ends with allocating cash to pay bills and for savings followed by the setting of income goals for the following week. The rest of the week my mind is solely focused on providing oustading service to our clients. Ah, now I can rest my weary head knowing that the ship is repaired and my island is safe.

Overcoming a Fear of Financial Numbers

Fear of Equations

How many small business owners know their craft (in my case Kinesiology), but have challenges with finances? Looking back it has been nearly 20 years since I first developed a fear of numbers. The words “don’t take math again” have been etched into my memory since they were spoken by my grade 10 math teacher.   Perhaps this new fear of numbers why I initially stared a degree in English and History?  It was near the end of my first year of university that I discovered that I really wanted a degree in Kinesiology. The irony is that a Kinesiology degree has numerous courses that have numbers and computations as part of their curriculum.

Now as a business owner it is even more critical to be competent at understanding my financial numbers as well various key statistics that drive my business forward. This fear of numbers has previously prevented me from feeling confident enough to develop cash flow projections and budgets.    I would much rather write, go play outside. update my website, go to the movies than sit down and complete cash flow projections however, I know they are important pieces to being profitable and running and an agile business.

What I think was missing from my financial education was how to properly manage cash-flow. One effective way to overcome a fear is to dive deeper into by seeking more knowledge and combining it with practical application. I found a couple of books that helped (see below) and started to in grain some weekly habits.

In addition have been working on  switching the “I am not good with numbers” thought to something more positive such as “I am in the process of being competent at understanding and creating cash flow projections“.

A business exists to make money, no shame in that. For me I enjoy the independence, but I also want the business to support my lifestyle and family.  There a few habits I am in the process of implementing to help my business thrive and strength my financial numerical literacy:

  • Balance books weekly
  • Complete weekly, monthly, quarterly and yearly cash-flow projections
  • Added line items in the projections to pay off debt, pay taxes and pay myself
  • Use the projections to what cash as to be on hand to make appropriate payments and know what sales have to be.
  • Use the projections versus actual to make strategic adjustments, increase sales or decrease expenses
  • Keeping all my receipts organized with Neat instead of in a shoe box!

It isn’t easy in the beginning, however the more frequently that these items are completed I gain more confidence in my financial management skills. This process also keeps me focused on creating a bright future instead of the berating myself for what has already happened.

Educational Resources

  1. Unleash Your Cash Flow Mojo: A Business Owners Guide to Predicting, Planning and Controlling Your Company’s Cash Flow – Sandra Simmons
  2. Managing Cash Flow: An Operational Focus – Rob Reider & Peter B. Heyler