Starting a business can be an incredibly time consuming venture. The three most important items required when starting a new business is 1) money, 2) time, and 3) more money. This is not an exaggeration since no matter how much time a business can suck out of you it can suck at least twice as much money from you.
Businesses and especially small business have huge potential growth rates. Some businesses can experience thousands of percent growth each year, which means that you really don’t want to starve your business for the time and money it truly requires. The real problem is even though business growth can be huge the chances of failure are equally large and this is what banks and other sources of standard financing will be looking at.
This means that as best as possible you should be trying to structure your company to exist on cash. The less you have to borrow for your business the lower your chance of forced failure. Forced failure can often occur due to the extremely high interest rates that small businesses can and are charged for borrowing money. The higher your reliance on borrowed money the higher your chances are that your business will not be able to become cash positive.
So what can you do to ensure you are operating in a cash positive territory. Firstly look for smaller sales rather than bigger sales. Small sales usually take far less time to close and that will ensure you are earning money more effectively. Also loosing a small sale will not affect your business as dramatically because your financial investment in the sale is much lower. Once your small sale process has been streamlined you should then begin targeting larger and larger sales. The other benefit of smaller sales is once you begin targeting larger prospects you will have a hopefully sizable base of customers upon whom you may be able to request references or referrals.
If a sale is going to require a cash investment from your side at the time of a PO, you should either ensure the deal has sufficient payment upfront (ex. half up front) or make sure you build in the cost of borrowing against a PO which can have very high interest rates. Playing too cautious with a sale can often be killer but not being cautious enough is a killer to your business so make sure you are always investigating your customers and suppliers. Those who are not reliable for payment or delivery can cause major financial difficulties and should either not be relied upon or terminated before they cause your business irreparable harm.
As always, let your gut and business instinct guide you. If something seems fishy it likely is so make sure you follow up and keep working on your business to achieve ultimate success.