Small Business

Cash flow crisis

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Solving cash flow problems has been just one of the lessons that have paid off for Sarah Hillier through business coaching.

Like many budding entrepreneurs, Sarah Hillier had always wanted to start her own business but lacked the courage to do so. Then, when she was six months pregnant with her first baby, she was unexpectedly made redundant. Her hand was forced.

“A colleague suggested I do some marketing consulting work for him in his IT business to keep me busy until the birth,” recalls Hillier, the founder of marketing and training firm RAW Consulting. “It was during this time I identified a gap in the market for the specialised marketing I was able to provide.”

Three months after her first son was born, Hillier launched RAW, which has gone from strength to strength and employs 20 staff across Australia who work from their own homes.

Now the mother of two boys, Hillier runs the consultancy from her Brisbane home. It has been a great business, but some time ago the signs of strain started to show and Hillier realised she needed help.

Winning strategy

Responding to a newspaper advertisement, Hillier entered the Optus ‘yes’ Coach competition and not only won twelve weeks of business coaching, but also a $10,000 holiday of her choice. The win has given her an opportunity to expose RAW Consulting to the more sophisticated techniques of fast-growth operations. Twelve weeks of coaching have highlighted the systems she needs to implement to take the business to the next stage.

Cash flow is a challenge for most businesses, and RAW Consulting is no exception.
“Cash flow was our number one issue for the past 18 months,” Hillier admits. “I simply wasn’t prepared at all for the growth of the business and in June this year we were very much on life support.”

In her first coaching sessions, Hillier came to see there was more to the cash flow issue than meets the eye. More than just a juggling act between incoming revenue and outgoings, she found the dilemma was “symptomatic of the bigger issues underlying the business”.

Switzer business coach Lesley Ann Grimoldby explains Hillier’s problem.

“She said at the beginning that cash flow is one of the issues. But it’s because she’s working with some quite big clients who she’s invoicing monthly, and yet she is very keen to pay her consultants immediately, so she’s paying them weekly, and there’s a disconnect there.”

A great business can be profitable but go broke if it cannot make payments. Growth becomes a nightmare and money woes can strangle business goals.

Growing a good business

Coaching has been a wake-up call for Hillier, particularly around the cash-flow challenge. Whereas once she would have simply blamed clients who did not pay on time, after a few weeks of coaching with Grimoldby she realised that this frustration was “just scratching the surface of the issue”.

“When I originally started talking to the bank, I believed the issues were about my suppliers, so we were looking at some options – debtor finance being one of them,” Hillier explains. “But now that I realise there are probably other issues there, I need to go back to the bank and talk about the best option for RAW.

“We have a very aggressive growth strategy and need to be able to have access to more cash. I’m very scared about committing to something that’s too big for us.”

Hillier now realises that her ‘obligation’ to pay her contractors as if they were employees on a weekly or fortnightly basis is misplaced.

“Really, I need to step back and say ‘as contractors, they need to be a little more flexible with their payment terms as I am with my suppliers’ ... They will need to understand where RAW is going, and whether they’re going to embrace that and want to go with us or not.”

Hillier has moved to develop a ‘positioning statement’ with contractors that clearly explains payment issues.

She has also moved to solve some banking issues, specifying her goals and being upfront with her financial institution about her needs.

“I’ve now altered my supplier and customer payment terms, switched to a more supportive bank and started to manage my cash flow via a worksheet on a daily basis. Although we are not totally out of the woods, we are definitely on the right track.”

RAW’s long-term goal is to become the biggest employer of home-based employees in the country. It is also targeting turnover of $3 million in three years’ time.
With her business processes in place, RAW Consulting is ready for the next step forward.

“I am motivated by my desire to succeed and to also give other people the opportunity to work from home,” Hillier says. “Every day presents a new challenge and I am always willing to take on board feedback and advice from others, especially those who have been there before me.”

Great leaders must be willing to make the hard decisions and have the passion to create a great business – and that is what Hillier is doing.

“Don’t bite off more than you can chew,” she says. “Get on top of cash flow early, and most importantly realise you are not your business and your business is not you.”

Click here for a complimentary business assessment with a highly-trained Switzer Business Coach.

Published on: Wednesday, April 08, 2009

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