‘Enterprisingly Me’ is a monthly feature where you can follow my entrepreneurial adventures. Names have been changed to protect the innocent but everything you read really happened.
I hope my story inspires you to take your first steps, or if you already have, then it lets you know you’re not on your own. Starting and running a successful business isn’t about being perfect. It’s about loving what you’re doing, learning from your mistakes and keeping the faith!
As you may remember we were in crisis talks over whether to continue to feed our latest project so it will be no surprise to you that we have decided to call it a day. We still have the product and are using it within our own business however we have decided to keep testing it out on our own customers before trying to take it out to a wider market. Feedback has been excellent but I think we underestimated how much time, effort and money it would cost to engage others in using it.
Things have gone back to some kind of normality but the problem with being an adrenalin junkie is that I’m always looking at new things to do!
I must say we all felt very despondent when making the decision to give it up but as long as we have learnt from this experience then it should make our business even stronger. Things we have learned:
Don’t assume there is a market for something without carrying out in depth research
Don’t invest in something unless you have fully considered the risks in relation to both finance and time – your time is precious particularly if you are running a small or micro business
Make sure you have involved the right people with the right skillset to drive the new business forward
Keep a close eye on the finances and don’t be afraid to pull the plug at the right time before it affects other parts of your business
I always think its like feeding a slot machine and hoping at some point it will allow you to win… you need to know when to stop the feeding and walk away.
Although the business is doing well I spend many sleepless nights worrying about cash flow and how to get our customers to pay on time.
Why is that some of the large businesses think it's OK to make us wait for our money when we have very limited access to additional funds from our bank. Don’t get me wrong our bank is really supportive however I don’t want to pay for additional overdraft facilities or a loan to give the larger businesses the opportunity to extend their payment terms - it’s just not fair.
So I’ve been looking at our own systems to see if there is any way we can push things along without upsetting anyone. It’s been really useful to take some time to look to see where we might be doing things, or not doing things, which help them to delay payments. We have a number of parts of the business that invoice our customers in different ways which include:
- Invoices raised automatically when our customers use our automated registration system
- Invoices raised as a result of a Purchase Order
- Invoices raised in an ad hoc way following a request for us to delivery a piece of work
- Requests for payments relating to project funding
Although our finance manager is really good at raising invoices and requesting payment it’s clear that we need to be more assertive when agreeing payment terms to include days to pay and payment plans.
This involves everyone in the business as once payment terms have been agreed the it’s difficult to get the customers buy in to change them. When agreeing payment terms we have started to consider:
- The type of customer and our relationship with them
- The amount the customer will be spending with us
- Their financial standing
- Any history of delayed payments
- Our expenditure in relation to work being carried out and the timing of that expenditure in relation to the income
- This allows us to measure the overall risk to the business and what needs to be put in place to manage that risk.
- The second aspect of keeping control of the cash flow relates to credit control. I have realised that there is also a lot to consider when chasing money. This includes:
- Providing a regular update to customers to alert them when they have not paid within their payment terms
- Finding the right person to speak to in the company when chasing payments
- Following up all requests for payment in writing if speaking to them personally
- Responding to requests for further information or copies of invoices as soon as possible
Finding a way of keeping in touch with all customers to build up a positive relationship. I find this helps when dealing with a variety of situations including managing cash flow.
There are two strains that we have on the business at the moment. The first is because we have had a really positive cash flow for the past months we have let things slip a little. This is really dangerous as now that we are looking to grow, the business we are going to have more expenditure and therefore the risk of being short of money has grown.
My speculate to accumulate theory could still work but I realise now that I need to be much clearer about what and who I’m speculating with if we’re going to grow this business into something we can all be proud of. Onwards and upwards and fingers crossed I’m not looking forward to too many sleepless nights unless I’m out celebrating our success!
Speak soon, Me x