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Common Sense Business Solutions

Your business is not a bank

Your plumbing business is not a bank. But when you are giving terms to customers that exceed what you get from your suppliers, you become one. And every time that someone does not pay you, you are a bank. But unlike a bank, your company does not have the resources to continue paying employees and suppliers when payments slow down.

On every client list there are a handful who do not pay until you call them, who tell you the cheque is in the mail, or who simply cannot pay. Having receivables arrive at the right time is the best way to ensure you can pay staff, contractors and suppliers on time—which is key to keeping your business running smoothly.



Manage your cash flow

Entrepreneurs understand that a $10,000 sale results in a nice profit. But most forget that the suppliers will be knocking at the door looking for payment long before the $10,000 comes to your bank account. Knowing the payment cycle of your customer and your supplier is important. Knowing what your cash flow will be on a day to day and week to week basis is more important than any profit and loss statements produced three weeks after month end.


Invoice on time

I do not have enough fingers and toes to count the number of times that companies in financial trouble were weeks behind in sending their invoices. This stack of paper is cash almost on hand.

Invoicing on time might mean as soon as a project is finished, or, in some cases, it might mean requesting a deposit from a client at the beginning of work to get cash flow going early on.


Make it easy to pay

Accepting multiple methods of payment is one way to accelerate receivables. Do you accept electronic payments? Or, farm animals in exchange, only? Cheques only? Credit cards? Bank drafts only?


Be disciplined

Better cash monitoring, collections and invoicing are all part of the same administrative function that must be done on a regular and frequent basis. Getting behind is death by debt.


I have taught many business owners the strategic importance of cash management. If you need a template to manage your cash, email me at [email protected] or [email protected]


Busy but not winning

I have several clients and a number of friends and colleagues who equate busy time with productivity. But, being “busy” does not always equate to being effective. Ineffective people abound. From outside they are hard at work with paper, phone calls, emails, meetings and more meetings. Their desks are piled high. They look frazzled. They achieve nothing. Bad entrepreneurs and ineffective managers complain loudly about the time they spend, how tired they are and waste the time of people around them who could be making them money.

In contrast, great managers and good entrepreneurs are stingy with time spent on unproductive, non-earning activities. They keep meetings, emails and phone calls short. They focus their attention on concerns that will make them money.

How do good managers operate? Good managers seem instinctively to be able to find the time to work on the money making projects. Here is short list of how to do it.

1.  Make a physical list and prioritize the items. If the items on the “A” must–do list do not earn money, re-consider your priorities. Making a list also prevents you wasting time lying awake at night desperately trying not to forget to do something. When I took my first time management course in the 1980’s, we wrote down everything on a to-do list. I still do. If the same “urgent” item is still there after a week, it will not likely ever get completed. Dump it or go to item 2.

2.  Delegate. Some jobs are simply better done by employees. If you are paying someone $20 per hour why are you doing that job for them?

3.  Block your time. Short focused bursts of two hours will produce more than a 12 hour day frittered away. Eliminate the noise by shutting off phones, radio, email and any other distraction from getting your work done. Close your door. If it’s not fire, flood or blood, ignore it.

4.  Deadlines work. Give yourself a time limit to complete a project. You have heard the adage that “if you want something done in an organization, then give that task to a busy person”. This is true because that person manages time well and completes to deadlines.

5.  Manage your energy. On most days my energy levels peak in the morning so I try to make my meetings happen in the afternoon or move paper shuffling to my least productive part of the day.

6.  Do the most dreaded task first. When that crap job is out of the way, the rest of the day will seem simple.

7.  Don’t attempt too much. More than any other characteristic, this is a most condemning character flaw. Too many great opportunities for fun, friends and business crowded into an already busy week. How can you do it all? The answer is you cannot and it is a worthwhile exercise to apply some rules to ALL of your projects. The one I have used for years is to ask 3 questions. Am I in control of this project? If not, why am I doing it? How much will I get paid? And, when will I get paid? It is simply remarkable how the answers will change your mind.

If you want to be a better manager or business owner, work smarter and not harder.

Chasing ducks

When businessmen tell me that being low priced is the only way to stay in business, I am skeptical. Price is the simplest way for a consumer to compare and is overused as the basis for a decision to buy. Price noise is the screaming toddler in the room - demanding excessive attention relative to importance. And most businessmen pay excessive attention.

In the July 2015 edition of the Business Examiner, the owners of Command Industries admit their shock after quizzing their customers. A mentor had suggested that they speak directly with their top customers and ask them, why do you buy from Command? "I was sure the answers were going to be pricing related and focused on comparing costs with our competitors," said Rob Woudwijk. “But the results of those conversations shocked me. It was never about the money. Instead they talked about the way we communicated with them, the level of transparency and honesty we have as a company and our problem solving mentality."

Would price have figured in the equation at any time? Of course, but it looks like price was further down the list than they believed. In a study reported by Right Technologies by Bob Thompson called the Loyalty Connection, price features lowest as the reason that customers stop dealing with a company. In his analysis, customers leave almost 75% of the time due to customer service problems while owners see that as being important in only 22% of the cases. Quality is seen by customers as an issue fully 32% of the time while owners rank quality as the suspect only 18% of the time. It appears that staff indifference is a greater cause of losing customers than doing a bad job.

Similarly, price was ranked by owners as the number one issue at 45% of the time while customers felt price was important only 25% of the time.

And what about employees? Do they value their paycheque more than a great boss or satisfying work?


Does Money Really Affect Motivation? A Review of the Research

In “Does Money Really Affect Motivation? A Review of the Research” by T. Chamorro-Premuzic published in the Harvard Business Review, the authors reviewed 120 years of research to synthesize the findings from 92 quantitative studies. The combined data set included over 15,000 individuals and 115 correlation coefficients. In the study there is a weak, almost negligible correlation between pay and happiness and so they conclude that money is a weak motivator.

So, where does this leave the average business owner? To focus exclusively on price differentiators is evidently NOT the answer. My dog swims with determination after ducks, but she never catches one. Being cheapest in the marketplace leads in only one direction - the dumbest competitor will win. And after the ducks have flown, those left standing.. er, swimming.. will have the best employees, happiest bankers, most motivated bosses and HIGHER prices. Where do you want to be?


About the Author:

Andrew Gregson published his book Pricing Strategies for Small Business in 2008. The book is now available in Europe, India, Russia and the United States. Andrew holds a Master’s degree in Economics from the London School of Economics. He frequently lectures to industry and trade groups. Andrew has owned businesses and franchises; worked as a business consultant, and now works in finance in Kelowna, British Columbia. You can contact Andrew through his website www.pricingstrategies.ca.

The price of money: Part 2

Click here to read Part 1.

Money is not a commodity. By definition, a commodity is a generic product that is bought and sold on price alone. Canadian bills for example, look the same, smell somewhat the same, and are available country wide. But, when you want to borrow money, rent the money in fact, the price for that money is not at all consistent.

Why does the price of money change? This happens because your lender or investor does a risk assessment of you and your circumstances that affects what they will be charging. Let’s look at this from the point of view of a business loan. Here are nine things not to do when asking for a business loan.


1.  Does the bank understand your business? I have seen deals collapse because the lender could not figure out how the company stayed in business and why anyone bought their widgets. In the 1970s there was a chain of sandwich shops in London, Ontario all loudly decorated with RED stop sign wallpaper. They were always empty and we used to speculate that they fronted for criminal activity. Do your homework on a unique selling proposition that explains in 50 words or less, how you make money.

2.  I have seen transactions collapse because the ownership structure is just too complicated, prompting the lender to throw his hands up in despair. KISS. Keep it Simple, Stupid.

3.  Is this a start-up? Most start-ups fail instantly and sometimes haunt the lender for years before finally collapsing. Angel investors have told me that 13 of 14 deals in which they invest end badly. So the 14th has to make up for all the failures.

4.  Credit history. Increasingly, we are depending upon the snapshot of the credit report to tell us whether you manage money well or not. No lender wants to fund a business where the money is managed from the cash till, or places his “lifestyle” ahead of his obligations.

5.  Assets to lien? Since the 1950’s banks have been encouraged to help people buy their own homes, thereby creating a careful lender game of deciding if the loan can be backed by recoverable assets. The poorer the asset quality, the higher the rate will be. Think of business assets as the poor relation to that home on the lake that the banker can seize.

6.  Skin in the game? Forget borrowing if you do NOT have your own money in the game. Until recently, that has been the only truth. But Canada has some great rules to govern crowdfunding and protect the unwary investor. Seedups is the Canadian version of an Irish company which helps start-ups get the initial tranche of cash they need.

7.  Strength of the management? The owner of the company typically makes the pitch to the bank or the lender to get more money. A long history of uneven results , while everyone else is doing well, points to rotten management. Doing poorly in a herd of low performers shows a management with no imagination.

8.  Strength of the balance sheet. Businesses can sell like crazy and still go out of business. In the 1990s my neighbour was a manufacturer and importer of children’s clothing, opening stores almost every month. Sales skyrocketed, profits were phenomenal but the stores failed. The lender will first look at your balance sheet and NOT the profit and loss statement. If your debt is high or you are experiencing a cash crunch due to high growth, be prepared for some tough questions about injecting more of your cash.

9.  Finally, going too late to the lender, bank or investor is bad. Arriving cap in hand because the business is now struggling shows poor judgment and controls. You can expect to pay more for your money and it will come with hooks.


This column focuses on business problems and how to solve them. Andrew Gregson, BA, MA , M.Sc.Econ is a mortgage broker, economist, and author.

Read more Common Sense Business Solutions articles

About the Author

Andrew Gregson, BA, MA, M.Sc. (Econ), holds a Master's Degree in Economics from the London School of Economics.

Andrew's experience working with an international business consultancy and being a business owner for 15 years was the impetus for his book "Pricing Strategies for Small Businesses". He brings his expertise in finance, pricing and debt restructuring to the table to help struggling manufacturing and service companies to return to profitability. This has helped companies to rebuild value and often to sell at much higher dollar values.

Andrew has contributed to trade journals, "Spark" on CBC National Radio and has been a guest speaker at business networking groups, colleges, universities on his topics of expertise - pricing, exit plans and debt. He is also a frequent contributor to blogs and online postings for business help.

Andrew is currently the President, Board Of Directors intent Financial Inc., his role is overseeing intent Financial Inc., Intent Investment Corporation and other related ventures.


Website link:  www.intentfinancials.com

Contact e-mail address:   [email protected]


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.

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