There’s nothing worse than sweating out payroll…
There’s nothing that makes me feel more like a failure than when I don’t know if I’m going to have the cash to cover payroll.
Vendors can wait, you can negotiate with bankers, even landlords will give you some leeway. But when your payroll is late you are affecting the lives and families of your team members, the people you count on to make your business tick.
My clients who are growing their businesses can get to feel like those days of sweating out payroll are long behind them — but that’s one of the paradoxes of growing a business — nothing strains your cash flow like rapid growth.
Let’s look at what happens when you land one big, new client.
- Your capacity is strained, so you rush out to hire a new team member to deliver all this new work.
- You buy a computer, a phone, a desk, and software licenses for that new person — all of which takes money.
- At the beginning of the new projects you way overdeliver (you want them to be happy, right?) and that pisses off some of your older, more consistent clients. Maybe one of them leaves. That’s OK, I’ve got these newer, bigger clients to replace them!
So now your costs are up, but these new clients take forever to pay and you’ve lost some older, steady clients. You’ve got money going out the door and nothing new is coming in. You have the makings of a full-blown cash flow crisis!
And it happened so fast! Getting a big new client is the idea, right?
Did you know that there’s a mathematical limit to the amount of new business that you can take on before you run out of cash?
I built a spreadsheet that calculates that rate for service firms. If you are interested, hit reply and I’ll send you a link so that you can calculate the maximum sustainable growth rate for your business.