Merry Christmas and Happy Holidays! As a franchisee for The Grounds Guys, I realize that while you’re working to reduce costs, generate the right type of revenue (with the right types of residential, municipal, and commercial customers) and operate more efficiently, it is sometimes easy to forget the basics. This month's article includes 10 things I’d like for you to consider as you close out 2018 and set new targets for 2019!
1. Stay on top of your cash situation. Take time to prepare cash flow projections for the next 12 months and revise weekly, as needed.
2. Know your key drivers and manage them. Keep a watchful eye on areas that affect cash flow: accounts receivable collections and equipment/inventory turnover. How are you doing compared to past performance and your fellow franchisees? Qvinci can help with this step! Please remember: do not to compare your chapter 2 with another franchise’s chapter 22. Watch key areas that affect your profits, net and gross profit margins a.k.a. contribution margin, labor and overhead recovery.
3. Monitor Accounts Receivables very closely. Process invoices immediately. Run an accounts receivable statement each week, and and take action on late accounts quickly. Respectfully, start with a polite but firm personal call (a.k.a. Dialing for Dollars) and don’t get off the phone without a commitment to a payment date. Collecting money owed you just a few days earlier/faster will improve your cash flow.
4. Make having good financial data a priority. Accurate, timely financial statements are critical to any small business, including yours. Your franchise consultant will love you for it. It’s also important that you make the time meet with your franchise consultant monthly to review your financial results.
5. Get funding now. The worst time to try and get financing is when you are about to run out of cash. Arrange in advance for cash injections, i.e., loans, and/or lines of credit based on business needs and future growth strategies. Your cash flow projections from the first tip will help you figure out how to pay it back.
6. Review your long-term financing. Are you financing long-term growth (or your assets) with short-term funding such as a credit line, or credit cards? If you are, see your banker about getting it changed. With record-low interest rates, everyone should explore refinancing today.
7. Your Franchise Consultants are good… use them. Meet with your franchise consultant regularly, listen to what they have to say and take actions accordingly. Hold yourself accountable for reaching new heights of financial performance and growth. Your franchise consultant is there to help guide and provide you with quality information that will allow you to make more informed, intelligent business decisions.
8. Don’t turn financial decisions over to others. There’s no need for you to become a CPA, but it’s very important that you can read and analyze financial statements and are able to review with your franchise consultant to assess your company’s performance.
9. Understand and use break-even analysis. Do you know your contribution margin (a.k.a. gross profit percentage)? This information helps you know how much more you need in sales when costs rise, or you make a deliberate decision to change your pricing. By better understanding break-even, you’ll also know how much to cut (no pun intended) if sales fall and analyze the need for expansion or working capital decisions.
10. Be Neighborly and stay close to our customers. This practice will generate goodwill for your business. It will also give you a chance to operationalize and use Neighblorly cross-marketing strategies to help you grow your business by securing more, similar customers.