You can lead a salon/spa that delivers extraordinary customer service, generates impressive sales, and from all outward appearances appears wildly successful - but if your company is fighting cash flow, it’s functioning under extreme financial stress. Cash is the fuel of business. If the business is starved for cash and running on fumes, it is officially in survival mode and begging for relief. It is the toughest position for any leader to be in because it is often unclear and complicated which path to take to lead the company back to daylight and fiscal stability.
Fact: Cash is king - but you knew that. Cash gives a salon/spa power and options that cash-starved companies just don’t have. Cash is “sleep good at night money” because it creates a sense of security. Cash is truly precious. So, with all the upsides to building cash reserves, why do so many leaders focus on driving everything but cash flow?
Here are six strategies to control and build cash flow:
- Gotta have a cash-flow plan: You can analyze your Profit & Loss Statement and Balance Sheet all day long, but these reports - no matter how timely - are historical reports of what happened. Looking at these reports is like looking in the rear-view mirror to see where you’re going when all they can do is show what happened in the past. You need a cash-flow plan (a projection for revenues and budget for expenses) that looks forward month by month into the future. Without a cash-flow plan, your driving your company financially blind. If you don’t have a cash-flow plan, contact Strategies. We have a coaching program that builds your plan and teaches you how to use it.
- Gotta live your plan: All diets work. All fitness programs get you into shape. The secret is 100% commitment and discipline. If you don’t commit 100% to following and living your cash-flow plan, you compromised your leadership and the financial wellbeing of your company. Most cash-flow problems are the result of leader behavior and bad financial habits. Commit to changing your financial behavior and habits and it’s amazing how quickly a company can emerge from the financial fiery pit of hell.
- Gotta share your numbers: I’ve been a long-time believer in sharing company numbers. Some leaders fear that sharing numbers will be detrimental to the company because employees may misuse or misinterpret what the numbers mean. Other leaders are against sharing numbers because there are certain “questionable” expenses they don’t want anyone to know about. (Perhaps that’s the reason the company is cash starved.) Fact: Sharing numbers is a learning process that takes time. You don’t just hand financials to everyone. You share numbers in stages supported by financial literacy training. People need to know where the numbers come from and what strategies move numbers in the right direction. Jack Stack, the originator of “open-book management” says, “With every pair of hands you get a free brain.” Get more brains focused on creating positive cash flow. No compromise.
- Gotta have financial scoreboards: Business is a game and you can’t play the business game without a scoreboard. Scoreboards tell the team if they’re winning or losing that month. On the 15th of the month, the scoreboard should say, “We’re at 50% - keep pushing.” Without a scoreboard, all the 15th of the month means is, “We’re half to we don’t know.” It’s not funny. It’s serious. Start scoreboarding and huddling every day.
- Gotta make tough decisions: The more critical your cash flow, the more difficult your financial decisions. In a worst-case scenario, owners may have to make adjustments to downsize their personal lifestyle. Don’t like that idea, then let any non-essential staff go. Don’t like that idea, then shut down the least profitable department in your company. Don’t like that idea, start cutting employee benefits. I think you’ve got the message.
- Gotta stop making excuses: Apple built a $100 billion cash reserve because its culture and leadership is disciplined to focus on what’s important and avoid distraction. Work on the gotta do’s and spend on the gotta haves. Avoid the nice to do’s and nice to haves. Entepreneurs are notorious for justifying just about anything. I know, I’m one of them. Stop making excuses or ignoring your cash-flow reality. No compromise.
Neil Ducoff, Founder & CEO
About: Neil Ducoff is the founder and CEO of Strategies. Since 1993, Strategies has been transforming salon and spa businesses into dynamic, profitable, and sustainable team-based cultures. Neil is a business trainer, coach, keynote speaker and award-winning author. For more information on Neil and Strategies, go to www.strategies.com. You can email Neil at [email protected].