TBL #003 - How to Get Better Sleep (Yes, Really) 😴

Last fall, I got introduced to a company that was struggling with cash flow. Sales had started to show weakness vs. the prior year. 

At the same time they had a lot of inventory on hand that was recently purchased.

You can see how a cash crunch might start to happen.

The business didn’t have a forecast in place.

We built a cash flow forecast with a focus on the next three months only. Once we felt confident in the short-term, we could look out to see what the next 12 months showed. 

As a business owner, you have a busy schedule & the need for a forecast doesn’t often show up until you absolutely need one.

Below are the two main benefits this particular business owner experienced after getting a forecast in place.

1. More Confident Decision Making

• Should I cut expenses?

• Can I afford to hire for this new role?

• How much can I take out of the business this year personally? 

These are all questions that business owners think about. A lot of times it can feel like you’re operating in the dark with big decisions.

Imagine if you had a forecast that showed you an estimate of how much cash you expect to have monthly for the next 12 months. 

Go through those questions above again knowing that you have that information available.

(We'll pause here to give you a second to go back through the questions) 

Does that make you more or less confident in making those decisions?

Maybe hiring the new role seemed like it would work based on your cash today, but what if this is the time of year you typically have the most cash on hand?

A forecast would highlight that it could cause issues this summer when sales slow down.

It could also show that you can absolutely make that hire with no concerns!

You make a lot of decisions every day. The forecast provides information to help you make the best decision for your business & to make it confidently.

2. Sleep Better at Night

While a forecast won’t cure a partner that snores or an uncomfortable bed, I can assure you that you’ll worry less than you did before when you have a forecast in place.

Why?

Because you’ll have clarity.

Even if the forecast shows a situation that is overwhelming, it’s better to know that & see it than keep moving forward without visibility.

Once you have clarity, you can put a plan together. That's exactly what happened with the business owner I was working with...but more on that later. 

And let’s say things are great…well then a forecast helps you rest easy knowing that your business is on the right track!

Going back to #1 above, when you use it to help make better decisions you’ll worry less about the decisions you make.

So, What Happened?

After implementing the cash flow forecast for the business I mentioned above we gained immediate clarity on what needed to happen. 

The current trend was showing the business running out of cash in the next few months.

We gained instant clarity & decisions had to be made.

Payroll was by far the largest expense for the business. We had to trim it back. This wasn’t an easy decision, but one that needed to be made. 

I met with the leadership team a few days after the cuts were made. They were visibly more relaxed than before. 

The forecast helped them go from low visibility -> clarity & running out of cash -> stability.

The Bottom Line 💸

• A forecast will give you visibility into your business so you can make better decisions.

• Visibility & clarity will help you rest easier knowing that you’ve explored how this decision will impact your business in the future.

• Forecasts aren’t just for companies raising money or on the edge of running out of cash. They can help every single business regardless of size!