FOR IMMEDIATE RELEASE

FROM:  WAYNE UNZE (797-1100)  

VAUGHAN COMPANY BUSINESS OPPORTUNITIES

RE:  GUERILLA CASH FLOW MANAGEMENT 

Regardless of how well you run your business, there are times when cash flow

becomes a trickle and you have to scramble to survive.  After interviewing scores

of New Mexico business owners on the subject, here is a synopsis of their ideas:

1.  Create a reserve.  During good times, at least consider the possibility of a

downturn in the economy and stash some cash.  Many business consultants

suggest a six-month reserve, but at least try to have three months of operating

capital stowed away in the event a rainy day turns into a deluge.

2.  Aggressively trim expenses.  Take out your monthly profit and loss statement

and examine every expense category for possible savings.  No business owner

enjoys paring payroll, but it is sometimes necessary to save the company.  Some

expenses, such as rent, utilities, insurance and taxes cannot be eliminated without

potentially dire consequences.  However, a desperate entrepreneur should be able

to trim at lease some fat from auto expenses, supplies, travel and entertainment.

3.  Offer early payment discounts.  If your business carries accounts receivable,

contact your customers and offer them discounts if they pay in ten days or less.  A

2% to 5% discount off a $5,000 invoice may create an “urgency” on the part of

your customer while helping you out of a cash bind.

4.  Talk to your vendors.  If your vendors have been in business for more than a

year, they have likely experienced their own cash flow difficulties.  Sometimes, a

simple telephone call explaining your situation and requesting a little more time to

pay can result in a sympathetic moratorium on an overdue bill.  Remember, your

personal contact means a great deal to a vendor.  It means you are taking a pro-

active role in solving your cash flow problem rather than forcing the vendor to

send you repetitive invoices without a response.  If you’re in business for the long

haul, maintaining a respectful relationship with your vendors is imperative.

5.  Consider leasing.  If you need a new piece of equipment to get you out of

your cash flow jam (i.e. to reduce labor costs and/or increase productivity), try

leasing rather than buying.  Many leasing companies offer rent-to-own programs

that allow you to purchase a piece of equipment at the end of the lease period. 

The cost of leasing a piece of equipment must always be compared to purchasing

that same piece, over time, through bank lending programs.

6.  Talk to your banker.  If you have a bank loan or line of credit, discuss your

situation with your lender.  No banker wants to write-off a loan, so most will

work with you to help find a satisfactory solution to your problem. 

7.  Hold a fire sale.  Recently, a friend with a “troubled” manufacturing business

asked me to sell it because he thought that was his only option.  Instead of holding

a “fire sale” for his business, I convinced him to fire-sale his old and obsolete

inventory.  Amazingly, he was able to sell off about $50,000 worth of inventory

he thought was unmarketable.  E-bay offers yet another venue for manufacturers,

wholesalers and retailers to “dump” unwanted inventories and free-up valuable

cash.  This same strategy applies to old furniture, fixtures and equipment that

have outlived their usefulness to you, but may still be a low-cost salvation to

fellow entrepreneurs.

8.  Empower your employees, friends and family.  Before you throw in the

towel, have a frank discussion with your employees and offer ownership interests

to those willing to contribute to keep the company afloat during the tough times. 

Employee contributions can come in the form of either cash or reduced wages.

Friends and family should also be surveyed to see if any “arm-chair”

entrepreneurs are willing to invest.

9.  As a last resort…Factoring.  Several Albuquerque firms will factor accounts

receivable (lend money in exchange for a secured interest in the company’s

accounts receivable).  I consider factoring a last resort measure due to the high

interest rates that apply.  If factoring becomes a company’s modus operandi

rather than a last gasp measure, it can contribute to the eventual demise of the

business

Essential to any course of action is to have a realistic plan in place for the

application of any funds (or reprieves) you receive.  Few vendors, bankers,

employees, friends or even family members will want to assist you without a

reasonable expectation that your business will survive the current crisis and

eventually prosper.