Cashflow

Talking to a franchise partner at last week, and the conversation turned to the strain growth can put on a business’ cash flow.

I know – I’m that guy at the party… 🤓

Running out of cash is the number 1 killer of small businesses. Being profitable doesn’t necessarily protect you either; you can make a profit on paper but if you’re not collecting the money, you’re going to have issues.

As we grew the original GoodOaks office from £168k revenue to £1.4m in two years, we learned a lot about managing cash flow. Here’s our 5 key takeaways:

• Direct Debit is your friend. Having that as the default payment method for your clients, and making sure the mandate is signed before the package of care starts, has reduced our bad debts by over 80%
• Take deposits for any packages over 3 visits per day. It makes a massive difference, and can weed out some potential problems with payment before you even start. “I thought this was a free service… etc”
• Have awkward conversations early. A nudge personally by the owner of the company is infinitely more efficacious than an email from someone in the accounts department they don’t know
• Account for all your costs in the forecast. For example, Recruitment. Usually, that line in the cashflow forecast is the recruitment advertising spend. But who is paying for the DBS checks? And references? Who’s doing the induction training, and are there any direct costs associated? You also need to factor in paying for the recruits’ time they’re on the training course, and the time spent shadowing your team to get them up to speed too.
• Beware of bigger customers. They can make your business, but can also break your business. The NHS and LA will have their own payment terms and invoice formats you’ll generally need to agree to. They also won’t be phased about putting your invoices ‘on hold’ for a month or two (or three) if there’s a query. Nightmare.
• One bonus tip – Build a buffer. You never know when you might need it. Don’t take all your profits out of the business but keep building a war chest for further investments and protection from bumps along the road.

I hope the above is helpful. Bear with me, but I’ve always thought a start-up owner is a little like being an astronaut (a lonely and daunting trip into the unknown, but also really quite exciting). Astronauts are trained to anticipate risks by asking themselves “What is the next thing that is going to kill me?”.Not a bad way to think about business risks I’d say.

As always, if you’d like to find out more about homecare start-up, franchising, or GoodOaks, simply book a call with me here.

Best wishes, Ben.