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When Small Businesses Reach the Danger Zone

It seems counterintuitive, but the facts
show that the failure rate for small businesses actually increases with
longevity.

If you do a quick internet search, you’ll find
a primary reason for business failure is lack of sufficient cash flow. That
certainly makes sense, given a business that doesn’t have enough cash coming in
to pay its bills isn’t likely to be doing well.

But, why, after years in business, is a company
more likely to experience a shortage in cash flow than a newer one? Let’s take
a look at several factors that can help explain this puzzling statistic.

If it’s always worked before, why change it?

It’s human nature to
assume that what we’ve always done in the past is the right thing to keep
doing. This tendency overlooks that eventually everything changes. Technology,
customer desires, competitors, workforce mentality—it all evolves over time.

Business leaders who are reluctant to challenge
the status quo or experiment with new ideas shouldn’t be surprised when sales
levels aren’t what they used to be. Entrepreneurs who are willing to evolve and
change their processes when necessary continually lead their companies into a
steady cash flow position.

Remember
what it was like in the beginning 

Staying
in tune with market changes doesn’t mean losing the focus you had when you
opened your doors. Maintaining passion for the long-term vision as opposed to
jumping into impulsive, short-term solutions is not likely to steer companies
wrong.

Many companies when they first
started had a “lean, mean, fighting machine” approach to success. A lean
business continually becomes more efficient and agile over time to improve
operations and quality and produce reliable, loyal customers, and maintain a
healthy cash flow.

Beware
of the sneaky cashflow killers

When sales dip, customers leave, expenses go up
or competitors up their game, it’s reasonably easy to understand why cash flow
is taking a hit.

But there are other, not so obvious, factors
that can slow cashflow. Here are a few:

  • Inventory ups and downs aren’t managed.
    Maintaining proper inventory levels at all times is critical to success. If
    your product is in high demand at certain times and you don’t have enough, you
    lose business. If orders go down and you’re sitting on a large surplus, you’re
    losing money.
  • Customer needs aren’t Job #1.
    Customer expectations and specifications can turn on a dime. The time it takes
    for you to react to them can be the deciding factor between them choosing you
    or a competitor. Your business has to establish the ability to adapt and
    deliver quickly.
  • Employees lose job satisfaction. Your
    people can be your company’s biggest asset or its downfall. Asking them to do
    things they weren’t hired or trained for degrades their efficiency and sets
    them up for failure—neither of which is good for the bottom line.

Outsourcing
can be the small business owner’s secret weapon

Many smart small business owners turn to local
outsourcing to help them…

  • Try
    new ideas without a large outlay of cash upfront
  • Improve
    operations by eliminating waste
  • Ramp
    inventories up or down when needed
  • Quickly
    react to changing customer needs
  • Make
    the best use of employee talents

Contact us at
Ohio Valley Goodwill Industrial Services to get a more in-depth understanding
of how our outsourcing services can help your company’s cash flow stay healthy
for many years to come. We’d be happy to speak with you and arrange a free tour
of our facilities.

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