Agency cash flow: How to become cash flow positive
Running a business is tough. Running a business that primarily sells people’s time and skills is also tough. Put the two together, and you might be wondering why you decided to start an agency in the first place! But then you remember that you are fortunate to get a unique opportunity to create fantastic work, spend time with amazing people, and have a real impact on your clients’ businesses.
Your biggest challenge is probably cash flow, and if it is, it might give you some comfort to know that you aren’t alone. According to research, the reason most small businesses fail is cash flow management. This includes poor cash flow management, starting out with too little money, and lack of a developed business plan.
And it’s not only small businesses that suffer. Many established businesses have crumbled under the weight of cash flow problems. Of course, 'selling more' is the obvious answer but it isn’t usually as simple as that, because selling more also means investing more.
Fortunately, there are a few quick wins that your agency can implement today to regain control and get yourself into a cash flow positive situation.
Learn more in our new Guide to Agency Cash Flow Zen – you can get a copy here.
Cash flow vs revenue, which is more important?
Many agencies seem to focus on annual revenue or the value of their 'book', and understandably so, especially when acquisition is the goal. But, as some experts point out, the problem with using revenue as a measure of value is that it doesn’t take into account the cost of generating income. Cash flow is a much better indicator of the quality of an agency’s earning power which, at the end of the day, is what owners and potential buyers are really interested in.
How can you increase cash flow?
You can learn more by downloading our guide, but here are some of the key factors to consider:
- Try to work on retainers, to ensure a steady stream of income each month
- Review your pricing
- Micromanage your spending
- Learn how to forecast accurately
- Ask for 50% deposits on big projects
- Streamline credit control
Don’t let cash flow challenges strangle your agency
With the right understanding, guidance, tools and processes, you can take control of your agency’s cash flow challenges and build a bright future.
