When I see a business which needs some money to do new things, the first thing I’ll consider is the organic cash flow model. This is where you expand the company using money which is already coming into the business, or increase the amount of money coming into the business in order to pay for the expansion.

Photo by Bashed

For example, if you need to take on a new member of staff, I would work out how much that person is going to cost. Roughly, I’d advise that you have 3 months of salary + NI + the cost of their desk space, computer etc in the bank as a cushion before you take someone on. Some people prefer 6 months as a rule of thumb for a little more security, or if it’s going to take a bit longer for the new person to help you to earn more money. We’d then look at how your business could afford to do this.

But I don’t have enough turnover

Many of my business advice clients want to take on a new member of staff, or improve their website, but believe that they don’t have enough money coming in to finance it.  They have been waiting until they have enough cash to be able to afford it, but a lot of businesses seem to get stuck at a certain level of turnover.

And if you decide that you’ll wait until magically you can afford that new person, you’ll always be waiting.

You need an artificial way to raise your ceiling, so that you can get enough money to get the new person, or afford the rebrand, or take time out from selling services to develop your new project.

How to raise your ceiling

There are two ways to get the extra money you need. Firstly, you can cut back on how much money you take out of the business. Do you really need that extra latte? Maybe you don’t need to buy those new shoes right now. Can you get a better deal on your mortgage? These are all good things to check anyway, just for the sake of your financial health. If this sounds like an area you could do with thinking through, speak to Simonne Gnessen, who is extremely skilled at helping you negotiate the personal financial minefields.

Secondly, you can decide to increase your turnover in the short term. Can you put up your prices a little? I bet you haven’t increased your rates since you first heard the words “credit” and “crunch” put together in a sentence. Can you squeeze another couple of customers in? Can you be slightly more assertive in your marketing, or go to a few more networking events, so there’s a little more money coming in each month?

Targets

If you apply this to your own business, you can set a target for the extra money you need. Maybe you’re a techie type company and you want to move away from developing websites for clients and towards your own online products. Identify how much money you would need to step away (or partly step away) from client work for a few months, and work towards this.

I highly recommend putting the extra money into a separate savings account, preferably on a standing order each month. Although you’ve still got exactly the same amount of money, splitting it between two accounts means that you’re more likely to save it up, whereas if you leave it in the regular business account, somehow it’s more likely to disappear.

Key points

This is a fairly long post, so I’ll sum up the main things to remember:

• Decide what’s going to make your business zoom in the future
• Work out how much money you’ll need to do this, both as a one off cost (e.g. new website) and as an ongoing cost (e.g. staff salaries, ongoing marketing costs)
• Set a target to save up
• Work out how to save up the extra – reduce spending and bring more in
• Put the money away so you don’t get used to it

Applying this to your business

If you are serious about having a grown up business, and recognise that you need to bring some money in to do this, watch out for the other posts I’m going to be writing soon about other ways of getting cash into your business to fuel growth. I’d advise subscribing so you don’t miss anything.

And if you can’t wait, or if you’d like to talk through the implications for your business, do feel free to get in touch and see if I can help you to make all this into reality.

I’m going to be writing a series of blog posts on how to get money into your business.  If you’re going along quietly and have no plans to grow your business, or you have all the money you need, then I wouldn’t bother reading for a couple of weeks.  If, however, you’re interested in getting some tips on how to fuel your business growth strategy with some hard cash, then keep in touch, as there will be some good things coming out.

If you’re ready to have a grown up business and need some investment or some extra working capital, I’ll be looking at some different ways to bring money into your business to help it grow and flourish.

• Why you need money to grow – this isn’t as obvious as you might think
• The organic cashflow strategy
• The outside investor strategy
• Getting the bank to pay up

If this sounds like your sort of thing, then make sure that you’ve signed up to get the blog posts fresh off the press.  In fact, it would be lovely if you’d like to subscribe (by RSS, twitter, email, pigeon post…) and keep in touch anyway.  You never know what might help you to discover the Joy of Business.

photo by community friend

On Monday I’ll be representing the Brighton and Hove business community at the inaugural meeting of the Living Wage Commission, organised by the city council, so I want to get your thoughts before I go along.

What’s the living wage?

The idea of the living wage is that everybody in the city should be paid enough to live on.  Nationally, this has been calculated as £7.20 per hour, although bizarrely the figure suggested for Brighton is £7.19 per hour.  This is is more than the national minimum wage of £6.08 per hour. While the minimum wage is a legal requirement – you can’t pay your staff less than this, the living wage can’t be enforced.

Why might we need one for Brighton?

Brighton has some of the lowest wage levels in the South East.  This, together with the high number of students in the city, silly house prices and 3-4% unemployment means that we’re not a rich city compared with our neighbours.  All of this has an effect on the health of local businesses, which is my concern.  Businesses which sell to consumers in Brighton find it difficult because there’s not a lot of money circulating in the economy.  Businesses which sell to other businesses can find it difficult to charge good rates, unless you sell to London or the rest of the UK.

There’s an argument that raising wage levels would mean that there’s more money in the local economy, which would then be spent locally, helping us all.

But wouldn’t a living wage be expensive for businesses?

When I’ve been talking to other people about the idea of a living wage, some business people have been horrified by the idea of wage rates as low as £7.19 per hour.  In the knowledge sectors (consultancy, digital, medical technology, education etc) this is a pretty low figure.  Not many web design companies pay their staff on rates this low. But other sectors such as tourism, entertainment (pubs, clubs, restaurants) and agriculture pay the minimum wage, and find it difficult even to pay this amount, because their margins are very low, and because wage rates are traditionally low in these sectors.  It’s interesting to note that these are the sectors which find it difficult to attract and retain staff and often rely on young people, part timers, and people from overseas.

If you can’t enforce it, what’s the point?

That’s a good point, although you could argue that the national minimum wage isn’t really enforced very well anyway, but most employers accept that you have to pay this.  I think that for a living wage to work, you’d have to make it aspirational, so that businesses want to pay this.  I was talking to one of my lovely clients about whether they should take on an intern, and I commented that most people like to pay their interns at least minimum wage.  Because 30 minutes earlier, we’d been talking about the idea of the living wage, he immediately responded that he’d pay his intern the living wage.  By sowing the seed of the living wage, he’d taken this on board, and wanted to pay it.

Let me know what you think

These are some of my ideas about the living wage – let me know what you think and how it might work in your business so I can point your views forward on Monday.

I’ll be doing a few talks in October, so if you’d like to come along and hear some of my stories about business, these are the ones to watch.

CityForum Brighton

City Forum is a half day of ideas generation, discussion and planning for your thoughts about how Brighton should be.  I’ll be on the panel at the culmination of the event to talk about the ideas which have come forward during the day, and how we take some of them forward.  I’m pretty sure I’ll be talking about action, implementation and the role of businesses in the city.

This is a good event if you’re a Brightonian and want to be involved in how the city develops.  If you’re just interested in networking for your business (and there’s nothing wrong with that) it’s not the one for you.

If you fancy it, find out more and book a ticket.  It’s free.

Brighton Chamber Spotlight Supper

I’m one of the serial entrepreneurs speaking at this Spotlight Supper on the 19th October.  A serial entrepreneur is someone who keeps setting up and running new businesses, not someone who has muesli for breakfast. Actually, I’m both, but I’ll resist temptation to repeat this very poor joke, and talk about my experience of running businesses since I was 23, and how I’m now running the Joy of Business and Tender Winner at the same time.

This is a good one for business networking in a friendly environment, with some pretty tasty food at the Hove Kitchen.  It’s £16 for Chamber members.  You are a member, aren’t you – otherwise it’s £28. Come along, it’ll be fun.

E-Thursday – Internet Entrepreneurs

The very next day, I’ll be on stage again at Sussex University’s E-Thursday, chairing a panel of online and digital business people who will be sharing their stories, and giving tips about how to run an online business.  This should be a good one, book here to come along.

Lewes Hive

Lewes Hive is a new co-working space in Lewes.  They’re running a series of lunchtime events and on the 27th October, I’ll be talking about how to enjoy being busy without killing yourself with hard work, and my experiences of building successful businesses while still having time to eat cake in the sunshine.  It’s a fiver to come along and check out the Hive and hear me speak.

Looking forward to seeing you there

You might know that I have another company besides the Joy of Business – Tender Winner.  There’s some cross over between the two businesses, as tendering for contracts is often part of the high growth strategies I help my Joy of Business clients develop. So I thought I’d talk about whether tendering might be a good idea for you.  If you want to find out more about tendering, or other ways to grow your business, then do get in touch for a chat.

When is tendering a good idea for your company?

Sometimes, I do end up telling people that tendering isn’t right for them – it just isn’t a good fit. I’d rather do this than take their money to find and bid for contracts they have no hope of winning.  Not only is this the only ethical choice, with the Tender Winner money back guarantee, I’d end up processing a lot of refunds.

So when should you think about tendering as part of your business development strategy?

Tendering works really well for companies who are big enough to handle a substantial new contract, but are still ambitious enough to want to grow.  You have to be hungry for new business, but your company can’t be starving in the meantime.  As a rule of thumb, if the contracts you’re looking at are more than 20% of your current turnover, then they’re the wrong contracts for you.  You won’t get past the prequalification questionnaire stage, and you’ll be wasting your time.  Find some other opportunities, or ask us to do the research for you.

Tendering also works well for companies who sell products and services which can be judged on price.  Printing, cleaning, graphic design, these can all be judged on price as, rightly or wrongly, they’re seen as commodity services where one supplier is probably as good as another.  Don’t think that tendering is only for standard products and services though – if you look at the Tender Winner highlighted tenders you’ll see that there are all sorts of weird and wonderful contracts out there.

Tendering for business is usually a medium term way of generating business.  The tender process might take 6 months, and then the contract might not start for another 6 months.  So you have to have the patience, and the cashflow, to be able to play a long game.

And you won’t win all of the tenders you bid for.  Not even the people who have been through the Tender Winner Win More Analysis win all of the time, so your company needs to be able to risk not getting the work.  But of course, when you do get the work, it can be a substantial new contract for you, and lead to more work in the future.