If I Fix Your Company’s Immediate Money Problem, What Is Your Plan to Fix the Issues That Got You There?

I’m not a turnaround management expert, but I’ve dealt with a number of these situations with clients in the early stages of their business operations (1 to 4 years). 

I’ve typically heard this logic: “If only I had X dollars, I could stop worrying and get on with running my business.” 

If I ask ten small business owners what they would do with a newfound cash infusion, half will spend most of it without thinking twice to eliminate their primary pain points—"Just make the pain go away!” That’s a band-aid, not a solution. 

Ask any source what the top 10 concerns of entrepreneurs and SMB owners are, and you’ll find at least two of these, usually in the top 5:   

• Cash Flow Management

• Access to Capital

• Economic fluctuations

• Financial management

Throwing new money at debt and cash flow problems doesn’t make them disappear; it can add fuel to the fire. The cause-and-effect scenario will surely repeat if the root causes are not addressed. 

My mantra to these negative cash clients is much the same as I advise to a raw startup:

1.  Collect as much money as you can, as fast as you can.

2.  Pay only what you have to pay, only when you have to pay it. 

Case study: I once had a client for whom I generated an equity cash infusion from a private investor. While he had a great product, he was deep in debt and inexperienced at managing cash. I then learned that he used most of the money to pay down his debt with little left to fix the root causes: marketing and sales, customer acquisition, and hiring and retaining qualified staff. The investor bought him out at a discount a few years later, tried to save it, and then went bankrupt. 

It’s never advisable to figure it out as you go. One false move when you are cash-poor and vulnerable can put you under. There are many ways to enhance your knowledge base before the fact and put it to work, but it takes time.

Planning and execution go hand in hand. Estimates and predictions about all aspects of planning can be established and then used as a routinely updated template. I recommend staying ahead of the game every 1 to 2 months—the younger the business, the more frequently. 

Once the hypothetical data has been translated and applied, it is then a historical guideline so you can adjust predictions to match reality in real time. A founder then has a management tool to quickly micro-pivot to meet challenges as they occur.

In other words, you can figure it out as you go by using real-world experience and data. Applying the details and metrics makes the new information and perspectives integral to the process.  Continuous improvement will greatly reduce the incidence of another wake-up call.

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Learn, Think, and Execute to your success – in business and in life.

Tom

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