If anything highlights the importance of maximizing cash flow and reducing the cost of leverage, it is the surge in interest rates: from 3.75% in December 2021 to 7.5% at the close of 2022. As we embark on this new year, all small and medium-sized businesses (SMBs) need to set targets for improvement – the stakes are high.
What methods are effective in maximizing your business in the new year?
The Weekly Scorecard
One way to achieve this is by implementing a weekly scorecard to provide feedback on the business’s performance, instead of relying on month-end financials. This allows for real-time analysis of your business’s performance, making it easier to identify areas that need improvement and take corrective action as needed. I provide a tool here to make this easier.
13-week Cash Flow Forecast
Additionally, updating a 13-week cash flow forecast on a weekly basis is essential to understand and monitor inflows and outflows of cash, and the ability to identify any potential shortfalls, so you can take steps to mitigate them. Check out mine here and read more on increasing your cash flow.
Automation of Processes
Automating and improving processes is another way to maximize cash flow and reduce the cost of leverage. Streamlining processes not only saves time and money but also increases efficiency and accuracy – and ensures that results are real-time.
An Up-to-date Valuation
In these times, national business valuations are down, with public companies’ valuations being down as much as 20%. For small businesses, as defined by the Small Business Administration (revenue between $1 million and $40 million, and fewer than 1,500 employees), valuations can be even lower.
This makes it an opportune time for small business owners to update their valuations. I use BizEquity for a high-quality, relatively inexpensive, current valuation with industry comparisons and key performance indicators (KPIs) to improve your company’s overall valuation. Understanding the value of your business helps you to identify any areas that need improvement.
A High-performing CEO and Team
None of the above will work if your leadership and team aren’t performing at their best. High-performing CEOs and team members:
- Closely monitor their results
- Are aware of the drivers of the business
- Consistently track progress
- Adapt to achieve their goals.
As a business owner, it’s important to not wander through the year without measuring your results and implementing tools for improvement, and encouraging your entire team to do the same. A consistent methodology, rhythm, and measuring can help identify what works, what doesn’t, what your competitors are doing, and how to best serve your customers.
This year, take a more disciplined approach to maximize cash flow and profitability. Implement a weekly scorecard, automate and improve processes, use a 13-week cash flow forecast, refresh your business valuation, and develop high performance in yourself and your team. You’ll increase efficiency, improve performance and ultimately increase the value of your business.
Let me help you evaluate and implement these methods for a very successful year!