Here’s an interesting puzzler. How is it possible for a profitable business to be growing and failing at the same time? The all important answer to this conundrum lies in the company’s cash flow.
Hot product companies that experience rapid sales growth have to purchase and assemble inventory months in advance of shipment to retailers and distribution partners. This eats up a company’s cash. And, just when customers get around to paying for last month’s product shipments the company has to invest its available cash in the next inventory production run. This is how too much success can quickly lead to an empty bank account.
If a commercial bank doesn’t step in to help a company catch up, the company may have to lay off workers, cut back production or face bankruptcy. This scenario is the living nightmare of American business today.
Here are five easy ways to protect your company’s precious cash life line.
No. 1: Limit exposure to high risk customers. Are your largest customers also your company’s slowest paying customers? If so, take immediate steps to diversify the customer mix to favor faster paying customers. Sales commission payments should be tied to the timing of customer collections too.
No. 2: Bill frequently. Most service-oriented businesses bill on a monthly basis or at the end of a project. Why not bill customers every week or every two weeks in the form of progress payments? The faster companies invoice customers, the faster they get paid.
No. 3: Reduce dependence on a single funding source. As too many entrepreneurs have learned, it’s relatively easy for banks to pull credit lines when companies can least afford it. To minimize the risks of sudden cash shortfalls, smart entrepreneurs set aside one or two credit cards for emergencies.
The first time a bank lending officer learns about your company should not be the day you are desperate for cash. If you don’t know the names of at least four bank credit officers, ask your business colleagues for referrals now! Smart business owners are always eager to meet credit officers from big and small community lenders.
No. 4: Streamline product lines. Entrepreneurs who don’t have a lot of loose cash should avoid producing too many products in too many styles to sell to too many different types of customers. The more complex a company’s product line, the more cash that is required to produce, store, advertise and deliver goods to customers.
No. 5: Set high profitability standards. The companies that are most vulnerable to financial heartaches during a recession or credit crisis are low profit margin businesses. Simply stated, low margin businesses have no margin for error. Don’t be shy about axing products or services that don’t match or exceed your industry’s average gross profit margins.
There is another reward for entrepreneurs who emphasize cautious cash management in their day-to-day business operations. Lenders and investors compete to fund them.
Allyn Rose is more than just another pretty face.
The Miss America contestant, who will represent Washington, D.C., in the Jan. 12 pageant live on ABC, lost her mom to breast cancer at age 16. Now, at only 24 years old, Rose has decided she will undergo a double mastectomy as a preventative measure after learning she is a carrier of the same rare chromosomal disease that her mother had.
"The idea that I could wake up one day and not have the same body that I did the day before is very scary," Rose, a self-proclaimed former tomboy, tells PEOPLE. "But I also realize my mom was diagnosed at 27. That's three years away from me. I'm not going to let my fear of losing this part of my femininity stop me from living."
Of the disease, Rose explains, "It manifests in male children, but there have been studies that women who are the carriers of it have almost a 75 percent likely chance of contracting breast cancer. It's a very strange change in our genetic code. Almost all of the women in my family have passed away from it."
Thinking back to completing teenage milestones that she couldn't share with her mom, Rose wants to take all the necessary precautions to ensure that these experiences are ones her own children will be able to share with her.
"My mom had her right breast removed at 27, but at 47 or 48, it came back in her left breast," she says. "It was already stage three. She could have had that other breast removed, but I'm sure there was a part of her that thought she didn't want to give up this other part of herself."
She adds, "My dad said he begged her for years and years to get it removed, but she said no. It's ultimately the thing that killed her. I had to become my own mentor. I had to go pick out my prom dress by myself. I had to go to my high school graduation without my mom. She didn't see me go off to college or go on my first date or drive a car for the first time."
But after the "very difficult" experience of losing someone she calls "incredible," Rose will make a huge sacrifice to ensure her own life will last.
"It's a very scary proposition," the model, who also works as a paralegal, says of undergoing the surgery. "But my father and I have met with a surgeon and countless doctors. Some of them are wary because I don't have breast cancer and I am so young, but others have said it's a very smart move, especially for someone who is genetically predisposed."
Choosing Life over BeautyRose describes the breast reconstructive plan as "very risky" and "not exactly seamless," but one that is worth it.
"Your skin may be damaged in a way that you will lose your nipple, or sometimes women lose all of their breast tissue," she says, [but], "Breasts don't define your life. I'm choosing life over beauty. I'm choosing to remove something that's so iconic to my womanhood."
Rose – who looks up to Robin Roberts and Giuliana Rancic, who both have battled breast cancer – is using her pageant opportunity as a platform to teach people how to be proactive in their healthcare.
"Title holders across the country get an opportunity to speak to their generation and have something they can advocate," she says. "Being in the industry and competing in the most iconic swimsuit competition in the world, I thought to myself, 'If I were to win and have this surgery a year from now, would I be a different Miss America because I lost my breast?' No."
Should she win the competition, Rose plans to undergo surgery after her duties are complete in January 2014. If she does not win, she will have the procedure done after her local duties are complete next June.
"To win the pageant would truly have my mother's dreams for me come to fruition," says Rose, who will show off her unique roller skating talents during the competition. "Never once in my life did I doubt my mom's love for me or that she wouldn't do anything to have me succeed in life. Some people will never experience that kind of relationship with a parent."