A Good Problem to Have? Managing Hypergrowth

Finding that your business has surpassed your expectations, and is growing faster than you ever anticipated is as exciting as it is terrifying. Hypergrowth is something that all companies dream of, but few achieve, and when they do achieve it most CEOs quickly realize that huge growth can have some serious consequences. Managing your cash flow during your period of hypergrowth is fundamental to any start up, or rapidly expanding business.

Learn from the experience

Hypergrowth can be a make or break period for businesses, and for the individuals involved. In order to expand your business quickly, you need to have the cash available to support the growth, including hiring more staff and expanding office space and equipment to house and support your staff.

Aditya Agarwal joined Facebook when the company was still only 15 people strong, and stayed there until he became Director of Product Engineering just six years later. Agarwal’s own startup, Cove, was then snapped up by Dropbox and Agarwal went from 30 engineers to more than 200. No wonder Agarwal says that “most of what I’ve learned in my career has been during a period of hyper growth and change.” Managing your company through a period of hypergrowth can be incredibly stressful and difficult, but as long as you have the cash to support your growth, and commit yourself to learning from your successes and failures, the experience you gain will be invaluable.

Expect the unexpected

When Jiliene Helman, the CEO of Realty Mogul, raised $9 million of funding, the company went from 6 to 30 people in about three months. Helman knew that there would be some growing pains, but there was one issue that no one saw coming, “we didn’t anticipate how badly crippled our organization would be when the need for parking spots quintupled in just one week. Nobody could get into the office on time and our employees suffered numerous parking tickets.”

Don’t get so focussed on expanding that you miss the little things. Of course for Helman, the real issue wasn’t parking spaces, but integrating so many new people and new ideas into a company.

Find the right staff

From his time at Facebook and Dropbox, Agarwal says that during a period of hypergrowth you need people who are:

1)      Fast learners

2)      Comfortable with rapid change

3)      Able to improvise and handle ambiguity.

Hiring the right people to add to a growing business requires a budget that will allow you to hire from the top of the talent pool. According to Helman, “it’s not about just training an employee to do their job, but training the employee on how we expect our team to make decisions and the core values at the company.”

Be a CEO and a leader

Many companies that start small and then undergo a period of hypergrowth undergo a massive change of responsibilities for the CEO. In a small business a CEO might be expected to do everything, from sales, to coding, to marketing. A CEO’s job isn’t to work on the small details, in fact it is just the opposite. Focussing on the small details means that you aren’t leading your people or carving out a future path for your company – important jobs for a CEO.

Instead of doing every single task yourself you need to build a team, and internal processes that allow other people to do the work for you, to the standard that you would expect from yourself. This is a costly but critical venture for any company experiencing hypergrowth. According to Helman, “Once you’ve hired a team for all the roles you used to run yourself ragged trying to fill, you can focus on being a CEO.”

Agarwal advises that, to be a leader, you need to:

·       Scale outside of your own skillset

·       Accept that there will be setbacks and failures

·       Take opportunities to learn, don’t be afraid of new challenges

·       Don’t get emotional.

Enjoy it!

If your company is lucky enough to experience hypergrowth then remember, no matter how overwhelming it may seem at times, you are in a position that most companies can only dream of. Enjoy it and make the most of it!

At J D Factors we specialize in helping companies find the financial solutions needed to survive periods of hypergrowth. Contact me today for more information.

Staying Afloat - 3 Tips to Better Manage Your Cash Flow

Managing cash flow is vital to keeping your business running, but for businesses looking to grow, cash flow is an absolute necessity. For many business owners, managing cash flow can feel like treading water in the ocean with crashing waves and undercurrents trying to pull your down. Even if you stay afloat (and statistically many companies don’t) it can be a tiring process that requires constant work and concentration.

For start-ups, SMEs and growing businesses the battle is even tougher. Failing to get a handle on your cash flow is a sure-fire way to seeing your business go under.

There are two crucial elements to cash flow:

1) Accounts receivable (i.e. the money that is owed to you)
2) Accounts payable (i.e. the money that you owe)

It is entirely possible to run a brilliant, profitable company with a negative cash flow. A big sale might be a profit on paper, but until you actually get paid that sale isn’t worth the paper it is written on.

There have been many brilliant people with fantastic products or services that have gone under simply because of poor cash flow management. Want to ensure that your business doesn’t fall victim to cash flow problems? Here’s how:

1. Track your cash flow

Ensure that your company is tracking weekly cash flows closely, know how much cash you have on hand, your break-even point, and create cash flow projections.
These projections should help you identify and counteract rough patches ahead. Pay equal attention to both projected expenses (everything from salaries and inventory to the gas bill) and sources of revenue (including sales, interest earnings, fees, collections, and incoming loans or investments).
Build projections for next month, next quarter, and next year, but remember projections are just projections - keep an eye on the balance sheet at all times.

2. Keep some cash reserves

Even the best run business will run into cash shortfalls here and there. Be prepared. Don’t let a lack of liquidity prevent your business from doing what it does best. Keep some cash reserves aside to help your business run smoothly during dry patches.

3. Prepare for shortfalls

Even businesses with extra cash on hand are bound to run into shortfalls. Sometimes shortfalls are unavoidable, even with stellar cash flow projections and a healthy cash reserve. When this happens you don’t necessarily need to go into debt. In fact, may banks won’t fund small businesses with cash flow problems. Instead, call J D Factors. We help businesses with:

• Factoring (sales of accounts receivable)
• Debt recovery
• Invoice discounting
• Non revenue – assumes risk of receivables

As cash flow management specialists, J D Factors can help you recover during periods of cash flow crisis without having to take on debt or negotiate with suppliers, customers or employees. With our help none of the people you do business with needs to know you’re having cash flow problems. Call us today to learn more about how we can help you better manage your cash flow.

Studies Show Cash Flow a Leading Cause of Business Failure

According to the Canada Business Network, businesses enter and exit the marketplace each year. For example, Statistics Canada’s Entrepreneurship Indicators Database showed that the “total number of SME births was 78,430, compared with 83,240 deaths, which resulted in a net decrease of 4,810 businesses.”

Mismanagement, a subpar location, poor timing, bad products or services, lack of experience or just plain old bad luck can all contribute to a business closing down, but perhaps the most common reason is insufficient capital as a result of negative cash flow. The Canada Business Network provides a number of survival tips, suggesting that owners of SMEs “understand your business finances, such as cash flow and handling credit” to remain afloat.

What is cash flow?

Cash flow refers to the movement of funds into your business (in the form of revenue, investment or other sources), and the movement of funds out of your business (in the form of payments, bills, salary and other expenses). Cash flow is the lifeblood of your business and is necessary in order to keep everything moving smoothly and working properly. Without cash flow your business will not be able to support itself.

Positive and negative cash flow

When you have more money going into your business than going out of your business you have positive cash flow, when the reverse is true (i.e. that you have more money going out than coming in) you have negative cash flow.

Know your flow

Cash flow seems like a simple concept, yet it is one of the most common factors behind failed businesses. Even the best product, location, knowledge base, and sales team can’t save your business if your negative cash flow leads to insufficient capital.

Cash flow is more complex than just money in minus money out. You need to have a grasp of exactly where that money is coming from, where it is being spent, and just as importantly when.  Your company can have a net profit but a net negative cash flow for a given time period. For example, if you bought $100,000 of inventory, sold that inventory for $200,000 but have not yet received the payment you may have a $100,000 profit on paper, but a net negative cash flow of $100,000.

Even though your sales team may have done a tremendous job to sell $100,000 of inventory for $200,000 you might not be able buy more inventory for them to sell (or even pay them their salary) until you actually get paid!

Simple tips to help you get a handle on your cash flow

Getting to grips with your cash flow is vital to operating and growing your business. If you want to keep your business running smoothly and well poised for the future, follow these simple cash flow tips:

• Profits are not cash: You can’t pay suppliers or employees with profits, you need cold hard cash.

• Growth requires cash: Growing your business uses cash, which reduces your cash flow. If you want to grow you need to increase your cash flow.

• Don’t do it yourself: Making sense of your cash flow isn’t as simple as adding up cash in versus cash out. You need to ensure you know where and when that cash is going.  Don’t be afraid to call in professional help.

• Working capital is key: Working capital is the cash you have available to bridge the gap between making a sale and actually getting paid. Depending on your business this gap can be days, weeks or months.

At J D Factors our team specializes in helping small to medium sized businesses meet their ever-increasing cash flow demands so they can run their businesses successfully. Factoring, the process of turning your accounts receivable into cash, gives your company immediate access to working capital for things such as payroll, marketing, paying vendors, and purchasing equipment and inventory, without incurring debt. Contact me today for more information.

Are you paying enough attention to your cash flow?

Cash flow is the amount of money coming into a business minus the amount of money going out. It is a deceptively simple concept that is far too often overlooked by small to medium sized businesses.

Cash flow is the blood that circulates throughout your company, it delivers oxygen to the extremities and keeps the heart pumping. Money comes in from investors, sales, and other sources and flows out when buying inventory, paying staff, and taking care of other business expenses. Without a consistent cash inflow, the cash outflow inevitably drains the company over time.

Cash flow is integral to determining the net present value of a company. Calculating weekly cash flow can be used to predict future cash flow from which the overall value of the company can be extrapolated. Using this model, businesses can make long term strategic decisions, as well as short term corrections.

Cash flow determines value

When cash outflow is greater than cash inflow, then the value of the company decreases. When cash inflow is high relative to outflow, then the business is worth more. Increasing future cash flow is integral to building the value of any business long term, but there are also important short term applications including:

• Servicing creditors
• Paying shareholders
• Informing bonus structures
• Reinvesting into the business itself.

Perils of ignoring cash flow

Despite the uses and benefits of a net positive cash flow, the concept is not applied across the board. In the late 1990s, many tech companies eschewed the net positive cash flow model, relying instead on investors who were all too happy to jump on the tech bandwagon. When the bubble burst the companies went under and pulled their investors with them. Webvan, a food delivery company is endemic of the tech industry’s problematic cash-adverse philosophy. According to Bloomberg “in 2001, Webvan drove off a cliff into Chapter 11 only 18 months after its IPO, due to rapidly disappearing cash reserves.”

Optimal cash flow

A low or negative cash flow current ratio is bad, but so too can be a very high cash flow. Money flowing into a business in large quantities with minimal expenditure means that there may be a lack of investment in the company itself. Exactly how much of your cash flow you should reinvest in your business is up for debate. According to Entrepreneur, some experts suggest that small businesses reinvest as much as 50% of their positive cash flow.

Underinvestment is as dangerous as over expenditure because it means that the company is stagnating. Increasing cash inflow allows businesses to make crucial investments which grow their business overtime, increasing future cash inflow. 

For small to medium enterprises (SMEs), maintaining optimal cash flow is critical to success. According to financial technology experts Daily Fintech “A survey of 1000 British SMEs, conducted by invoice finance provider Hitachi Capital, found that improving cash flow was key to unlocking growth.” In fact, the survey showed that cash flow was so important to these SMEs that “each quarter it was included as a top three consideration for business owners, alongside reducing overheads and market expansion.”

When cash flow is overlooked

Cash flow is one of the most important, and undervalued aspects of a business. It determines current and future value, and dictates reinvestment back into the company. Striking the right cash flow ratio is vital to success now, and in the future.

Steps to take to optimize working cash flow:

• Asses your current cash flow by calculating expense versus cash inflow. You will have to make some judgement calls, but remember it is better to be more conservative and underestimate cash inflow, than to find yourself short of working capital later on due to a faulty model. Different businesses calculate their cash inflow in different ways. The Wall Street Journal reports that Procter & Gamble refer to cash flow as “free cash flows”, and PespiCo calculates “management operating cash flows”
• Focus on cash inflow and reducing long term debt during challenging times
• Reinvest your net positive cash flow into expanding your business or making it more competitive
• Create internal processes for striking the right balance between net positive cash inflow and reinvestment. Many businesses set aside a certain percentage of revenue to pursue future initiatives. This may mean prioritizing growth over profits, bonuses, or other non-core expenditures.

At JD Factors we specialize in helping businesses get a handle on their cash flow. Contact me today for help solving your cash flow issues and for financially viable options to reinvest in your business.

Ca$h now, worry NEVER!!!

What if I told you that you could grow your business by adding new customers and never have to worry about them paying?

The answer is simple. J D Factors, will credit guarantee all approved invoices eliminating ALL risk you may have dealing with customers you have no previous payment history with. We will deal with your customers that routinely pay late or take too long to pay. You are able to pick and choose what customers you want us to handle. Here’s the best part, if your customer doesn’t pay for your invoice you don’t have to worry about chasing them down for payment because J D Factors assumes all the RISK of non payment! We have already paid you for the invoice! We take the loss not you if a company goes bankrupt or closes their doors!

By using our programs you can offer your customers longer payment terms. This normally includes a spike in sales and market share increasing the profitability of your small business. Also by using our programs you will have more cash on hand for:

• Day to day expenses, as well as unexpected expenses.
• Taking advantage of purchase discounts for large orders by having cash on hand

Get cash for your business, without adding debt. Convert your assets into cash and never worry about being paid by customers again. Leave the work and worry to J D Factors and let us help grow your business.

If you are interested in learning more about our customized programs please reach out to me via email chernandez@jdfactors.comon twitter @cash_4_AR or directly 289-242-3178

I welcome any questions or concerns and your  feedback is appreciated.

Christian

"my customers really are the best... I think"

Small business owners would like to think that their customers are never going to leave them high and dry because of the relationships they develop and the comfort level they have with their customers. They  believe they will  always get paid and be able to deposit their hard earned cash without issue or delay because the customer would never "not pay them".

However a lot of business owners ignore the warning signs of trouble from their customers such as slowed payments, ignoring and or not returning collection calls. These warning signs are sometimes ignored because they are friends, some because of a long standing relationship. While other business owners simply can't afford to put collection pressure and risk  loosing  a key account while holding on to the hope and belief that they will not be taken advantage of.

No business owner ever enters a business relationship  thinking that they will not be paid. This however is happening  more often then not in this current economic environment. Even if you take the steps to check credit references or take a down payment you are still  not guaranteed to be paid. It only takes one bad credit decision or one bad debt to sink the ship and put your small business in jeopardy.

If only there was a way someone could guarantee that you will  be paid for your goods and/or services eliminating all future bad debts forever. Luckily for small business owners there is.

Using JD Factors  non recourse factoring programs allows you the peace of mind that you will never have a bad debt again. JD Factors will not only provide you with working capital, it will provide you with the security and the peace of mind required to fully concentrate on growing your small business.

I welcome all  questions and comments. If you would like to protect your businesses from future bad debts, please contact me to learn more.

Christian Hernandez

289-242-3178

chernandez@jdfactors.com

Customers taking to long to pay? I CAN HELP

Part of growing your business, means adding new customers. Sometime those new customers don't pay the way we would hope. Their slow payments trends have a direct impact on your business. Time spent sourcing more new business or time spent on improving your own processes goes out the window, as you have to take time out of your busy schedule to make collections calls and chase your customers for money.  NOT ANY MORE!!

JD Factors, has the answer you have been looking for. Not only will we pre vet your customers to make sure you are doing business with good companies that will pay.  JD Factors will take all the CREDIT RISK, meaning if your customers never pay we will take the loss not you. We will pay you once the service is completed, and collect on your behalf, thus resulting in a few things. Most importantly you will have CASH on hand for your operating expenses, pay down debt or use it to grow and expand your business.

Let me know if I can help grow your business with strong positive CASH FLOW!

I can be reached, via email chernandez@jdfactors.com, or toll free 800-263-0664 x220