Do you need to quickly infuse cash into your business?
In this episode of Dadpreneurs Rising, Carl Taylor dives into the critical topic of cash flow for entrepreneurs, emphasising its vital role as the lifeblood of any business. He highlights the importance of having sufficient cash reserves, as even highly profitable businesses can go under due to a lack of available funds.
The episode explores two primary strategies for injecting cash into a business quickly: selling something and borrowing money.
When it comes to selling, Carl advises focusing on high-profit offerings, such as services or premium products with substantial margins. He also recommends targeting existing customers or warm leads, as they are more likely to make purchases than cold audiences.
Regarding borrowing, Carl discusses the options of seeking loans from traditional sources like banks or alternative lenders, as well as the potential of borrowing against personal assets like home equity. He cautions against solely considering interest rates and stresses the importance of favourable repayment terms that provide breathing room for the business.
Throughout the episode, Carl emphasises the significance of cash, not only for business survival but also for personal well-being, relationships, and long-term wealth. He encourages entrepreneurs to proactively manage their cash flow and provides practical insights into generating quick cash influxes through strategic selling and borrowing strategies.
IN THIS EPISODE, YOU’LL DISCOVER…
- Why cash is an important subject for business owners to understand (00:18)
- Why cash is crucial in your personal life (01:19)
- How to make sales that bring in cash fast (01:56)
- The option of borrowing (04:17)
QUOTES
- “We want to get you out of those weeds so that you can focus your time on the things that actually pull the right levers, the things that are going to increase your owner’s hourly rate. So you can take more money out of the business, and have less time involvement in the business, which ultimately will give you a more valuable business as well.” – Carl Taylor
- “You will make a lot more money selling a business that doesn’t require you, even if you are involved, doesn’t require you as the owner, versus what you’re actually selling them is a job.” – Carl Taylor
- “You’re wanting to be able to position you as the person who delivers a service where the service price is high, but it’s not linked to the hours you put in.” – Carl Taylor
WHERE YOU CAN FIND CARL TAYLOR
Automation Agency
CarlTaylor.com.au
LinkedIn
Facebook
Twitter
TRANSCRIPTION
Help, I need cash fast.
Hey, I’m your host, Carl Taylor, and this is Dadpreneurs Rising. It’s for you, if you’re a dad, and you’re on firm trying to balance it all, relationships, health, business, fatherhood, you name it, being a man in today’s society can be challenging, especially as an entrepreneurial dad.
Now, today, I want to talk about cash. Cash is a really important subject as a business owner.
Firstly, it is the lifeblood of any business. You know, you’ve all heard the stats that a business goes out of business every five years or you know, I’m not going to rehash the thing. But you’ve all heard that idea that it’s one in five businesses goes out of business in the first year and blah, blah, blah. The reason they go out of business is a lack of cash. You can have a highly profitable business and still go out of business. Why? Because you ran out of cash. Profit is theoretical, it’s, this is what should have happened in theory. Cash is, here’s what you have in the bank account, this is what you have to spend.
I don’t really know any entrepreneur who doesn’t want more cash, even if you’re absolutely killing it. More cash just gives you more opportunities to either invest, or to have fun, take out of the business and invest in fun activities, or invest in your long term wealth. If you’re struggling right now, or you’re in major debt, cash is the thing that can try and get you out of the hole you’ve dug. Or at least change things. Money and cash, interrelated, is often one of the most, what’s the right word, stressful topics in a relationship. Can be one of the key things that can drive a huge wedge between loving partners, is the stress of money or lack thereof, or how it’s being used. And so cash is a really vital part to business, relationship, and also long term wealth.
Cash is also a thing you can use to invest in your health, right? Like if things go bad, when in your old age, or even now, the more money you have, the better care you can get, the better doctors you can access, cash is an important thing.
So every entrepreneur, in my view, should know how to inject cash. Well, how do you inject cash, you really got two ways to do it fast. There are there are other ways to do it, that take longer, like raising capital and things like that. But really, if you want to do it fast, you got two options.
The first option, sell something. Not rocket science, right, but sell something. Now there are things to consider when you sell, like you don’t wanna just sell any old thing. If you really want to bring in cash fast, you want to be selling something that’s high profit. You also want to think about who you’re selling it to. It’s usually way easier to sell to an existing audience. Like if you’ve got an existing customer who’s already spent money with you, getting them to buy something else is going to be a lot easier than going to a completely cold audience. You’re running Facebook ads or running through the street saying buy my stuff, it’s going to be a lot harder to sell than someone who already has some form of relationship to you. So the tighter relationship is going to be clients who are paying you on an ongoing basis, a customer is someone who’s bought from you at some point. And then you got the warm leads who at least know who you are, versus the cold leads that, you know, they’re only meeting for the first time. So you kind of move backwards from that to find who to best sell to. And then what you want to be selling. I don’t care if you’re a product based business, service based business or anything, is you’re looking for a high price service. Why? A service because service has no real cost to deliver, usually apart from time. Now occasionally, there’s software licences, and there’s other things involved. But in general, if you’re getting a nice high profit margin service, it’s usually all you’re doing is selling some time. If you are a product based business, and there’s zero way you can add a service component to what you do, I challenge that, I would say there is but if there isn’t, then you want to be finding a very high profit margin product that you can charge, ideally, a premium price for. So it’s not something you’re looking for high volume, you’re looking to be able to sell just a few units, and make a decent amount of cash from that. If you’re trying, if you have to get 1000s of sales to hit the cash numbers you need, you’re looking at the wrong type of product, and you’re not going to make it fast, unless you’ve got a list of millions and millions and millions. That’s a different story. But most small business owners that I talk to aren’t in that position. So you want to be finding a service that you can sell to ideally something you can sell to existing warm audience. So that’s option one, sell something.
Option two is, borrow from someone. Now some people borrow from what’s known as the Triple F Fund: friends, family and fools, right. People who will just randomly lend you. Pros and cons to that. Probably another whole episode to really go through those pros and cons. I probably don’t need to list it out to you if you’ve ever borrowed from family. Many business owners have done it. I did it in my journey. Many of the members in my community have done it. It comes with its own challenges. Sometimes it works well. Sometimes it doesn’t. So you can borrow from friends, families, and, you know, the full people who are foolish enough to do it. Usually though, you’re gonna go to someone more established, whether that be a bank, or some sort of private lending institution who might be facilitating p2p loans who other investors have invested. But they’re going to review, they’re actually going to review, they’re going to have a fixed interest rate, often, business loans are a lot higher. So a quick little tip here, and this is not financial advice, seek your own personal advice. But if you have a mortgage for your house, and you have any equity in it, lending from your personal mortgage to use in business is going to give you a far better interest rate than going and get a business loan, there’s a lot of things to consider. So I’m not saying do that, I just want to share that thought process. If you are currently going, I need money from a bank, and you’re talking to them about business loans, and you’ve got equity in your house, it could be something to consider, although that same thing could put a lot of stress on the relationship depending on how you and your wife are right now. So as I said, that is not advice. Just a little side note I want you to have. But if you’re going to lend, it’s really important that you understand that it’s not the interest rate that matters on a business loan. You know, often people get the interest rate of business loan. This is expensive. Why would I borrow at that? That doesn’t matter. What matters is the term. How long do you get before you repay it, and, you know, is it an interest payments or interest in principle, because it’s the terms that are going to allow you to survive. You could take an existing loan, let’s say you owe, let’s say you owed $100,000, and it needs to be paid back in 12 months from now. If you refinance that and allowed you to still pay back that money over the next three years, your repayments will look, yes, you’ll pay more in interest, but your actual monthly repayments will go down, which will take a lot of squeeze and pressure off your business. If you’ve got a growing business that was struggling to make those payments giving you that extra breathing space. While overall, the cost through the interest will be higher, would actually give you the ability to continue the business in a far better way than if you try to continue to stay paying that loan, that whole amount. Now, if you do refinance, it’s really important that you ideally get some extra cash and you’re not just refinancing what was already there and then you use that extra cash to ensure that you don’t fall into the same trap. Borrowing money to pay off old bills when your business model was broken, and you weren’t, it’s just going to dig you in a hole faster that will send you close to bankruptcy, which we do not want. Borrowing money should be something that you use, when you really, it’s just you need to bring down some of those costs. So you’ve already done the borrowing and we need to restructure it. And you’ve got a clear use for that money to help ensure you won’t go back into a hole. If you borrow money to get out of a hole. It’s a very different, messy story. So you need to inject cash into your business fast. As I said, you got two things, sell something or borrow. You can do a combination of both and really expand, right? You borrow so that you can have something to sell and you sell something and then you can just continue to multiply and multiply and multiply.
I hope that’s been helpful. And until next time, keep up the journey.