How To Improve Cash Flow as a Coach or Consultant
Are you experiencing challenges getting consistent cash flow in your business?
And now you want to increase cash flow in your business to build a comfortable lifestyle business, then this new article is for you.
In this article, I am going to walk you through the process of improving cash flow as a coach or consultant, STEP by STEP, so that you have more cash flow to invest in the area of your business that needs attention.
The idea for this article emerged when I was having a conversation with a female coach a few weeks ago and she said: “Shishir, I just need to get my sales and marketing working and the money situation will be fine”.
I told her that her belief was misplaced and to improve the cash flow she needed to allocate her cash into different buckets in business. I asked her if she knew how to do it, and she told me that she didn’t know that. So, I shared with her.
I also told her that she needs to focus on STRUCTURE, STRATEGY, and SYSTEMS to improve cash flow.
Through this article, I am sharing it all with you today.
PART 1: An Overview of Cash Flow Structure, Strategy, and Systems
Let’s start by learning about structure.
1. STRUCTURE
Which structure are we talking about here?
The structure of cash flow allocation.
It means you need to allocate a percentage of cash coming into different buckets.
Allocate cash coming into these buckets — so that you know the cash leftover percentage for you.
So now, you know, for every $100 cash you bring in, you are left with $45 before paying taxes.
Having this information is so helpful because it gives you clarity on how much cash you keep out of what you get.
You can then use this clarity to understand which area of the cash flow funnel you need to focus on to improve cash flow.
2. STRATEGY
Once, you have the cash allocation structure in place and also have clarity on the metrics of cash allocation, then you can develop a strategy to improve these metrics.
Next, build a strategy to improve the metrics for each bucket of the structure. This will lead to an improvement in your cash flow.
For e.g. a strategy can be simply to say I need to have 25% income after paying taxes and you come up with a plan of action to manage all costs and expenses of 75%.
3. SYSTEM
Once you have the structure and strategy in place, then build a system, and process to:
- Measure the metrics that matter in the cash flow funnel on a regular basis
- Document the process of what happens in your business so that you can review to either delete, delegate or automate the process which frees your time to focus on cash-generating activities.
This will improve your cash flow.
Remember, a good process drives good results.
Now let’s do a deep dive into how to implement what I have shared so far, so that you can implement what I have shared, to improve cash flow in your business.
PART 2: A Deep Dive into CASH FLOW STRUCTURE
So many of my clients, when I start working with them, don’t have the cash flow structure in place.
As a consequence, they don’t know how much cash is coming in and how much cash is going out, and when. As a result, every month managing cash flow is like being on a roller coaster.
If you are in the same boat, then understanding more about CASH FLOW STRUCTURE will help you because it will help you put a cash flow structure in place.
I’ll first share a brief overview of what cash flow structure is and then I’ll share how you put yours in place with the help of an example.
What Is Cash Flow Structure
It is the structure of cash flow allocation (or the cash flow structure) that determines the cash flow margin in the business.
How does it help us improve cash flow?
When you have a cash flow allocation structure in place, you allocate a percentage of incoming cash into different buckets as I explained in the summary above.
We use this information to improve cash flow margin by changing the percentage allocated for each bucket.
A Detailed Look at Cash Flow Structure With the Help of Another Example
The cash flow structure you put in place should be sustainable to operate on a long-term basis as well as allow a cash flow margin to invest in the areas of your business that need attention.
To understand it better let’s look at these three businesses A, B, and C.
By looking at these, which business structure, you would like to have?
Business A has the highest cash inflow and also has the highest expenses to pay.
Business B’s cash inflow is lower as compared to business A but higher compared to business C.
Business B also has half of the fixed expenses compared to business A, but the same as business C.
Business C has the lowest cash inflow collection, but has the highest cash flow margin and has the highest cash remaining balance despite having the lowest cash inflow. Whether the cash flow margin is high or low for a particular business depends on the cash flow structure that’s in place.
So these three businesses show how the structure of the business in terms of cash flow margins affects cash remaining balance.
At the end of the day, cash remaining balance is what matters, because it is the amount available to you to invest in your business.
You might be thinking, Shishir, will business A not do better if it sells more?
Not necessarily.
Let’s look at this scenario.
The business has increased cash inflow by $50k every quarter, keeping the same structure of 50% cash flow margin at stage 1. Cash remaining is $80k at 40% in Q3.
Compare this with Business C as it is, in which the Cash remaining is at 57% of $40k.
Business A has to double the cash inflow from $100k to $200k to have $80k cash remaining and take the higher risk in the business. The risk is higher here because this business is running with a higher level of fixed expenses. If the business does not perform in the next few months, it will burn its existing cash balance.
Whereas business C has a better cash flow margin and so, it only has to increase cash collected from $70k to $126k and still end up with $80k cash remaining.
As the numbers get bigger, business C has more leverage because of the structure and will win every time compared to business A.
That’s why business is a game of margins.
And having the structure that enables you to have a high cash remaining balance that you can invest in marketing and other areas of the business to and generate more revenue and improve your cash flow.
The business has more firepower when it comes to the sustainability of the business and it can go longer in business like its a healthy structure of the business.
Now you might be wondering, how do I have a healthy structure of the business.
Choose the Right Business Sector/Niche for a Business With High Cash Flow Margins
One thing you can do, to have a healthy cash flow structure so that you can improve cash flow in your business, is to choose the right business sector.
A good business sector provides at least 25% cash remaining balance.
If you are in a business sector that does not allow that then pick a sector that has a higher cash flow margin.
Now you know, how the structure of the cash flow margin makes a difference on how you can have cash remaining in the business so that you can invest in areas of the business to make more impact.
It’s your turn. Work out the structure of your business and see how it looks like.
PART 3: How To Improve Cash Flow by Having a Financial Strategy in Place
If you can’t get a steady stream of leads to work with because you don’t have the consistent cash flow to invest in sales and marketing, then it is important to have a financial strategy in place.
So in the article, you have got an overview of THREE AREAS — STRUCTURE, STRATEGY, AND SYSTEMS — that you need to focus on to improve cash flow, and then we looked at the STRUCTURE piece in detail.
Now, we are going to go deep on STRATEGY TO IMPROVE YOUR CASH FLOW, so that you can invest in sales and marketing and grow your business and income.
So once, you have the cash allocation structure in place and also have clarity on the metrics of cash allocation, you can develop a cash flow strategy to improve the metrics for each bucket of the structure.
Once done, this will lead to an improvement in your cash flow.
Let’s start with Bucket 1.
Bucket 1 — Maximise Revenue in Business
Here are three ideas to maximize revenue.
1a. Increase Frequency of Sales
In my Income Accelerator program, I was talking to a career coach.
I asked her when was the last time she reached out to clients she had served in the past. Those who wanted to change jobs again.
She told me that she hadn’t done that properly.
So, I asked her to reach out to all old clients.
Because one of the cash flow strategies is to increase the frequency of sales by repeating the sales to the same client.
Let me ask you, what can you sell the same thing to your existing clients?
1b. Increase Average Order Value (AOV)
The next one is about increasing the average order value to increase your cash flow.
So, the discussion with the career coach continued, and we discussed how she could sell
her online course plus add support sessions to increase cash flow at the point of sale.
You too can do the same.
We can track all of this info, within one software without having to go back on forth with different software.
Now, it’s your turn.
What are the products you can sell at the point of sale to increase AOV and increase your cash flow?
1c. Decrease Revenue Stream
I know what you are thinking.
Decreasing revenue stream?
We have another client in the income accelerator program.
She is an animal communicator and has 18 product lines.
There is no way she can give attention to all product lines and deliver high-quality service to all clients. We identified that there were only five cash-generating products and the rest of them were time-consuming products without having much return.
So, we reduced the product lines from 18 to 5.
Now she has to give her attention to only five products that bring the most cash flow to her business. I call it the addition by subtraction method.
Because by subtracting from your product lines you add cash flow and are able to pay more attention to cash-generating products.
It’s your turn again.
Go through your product lines and figure out your top 3–5 cash-flow generating products and focus your time, money, and energy on those products.
Bucket 2 — Improving Cash flow Margins
Once, you have maximized cash inflow, minimize cash outflow.
Here are some of the things you can do straight away.
2a. Improve Cost of Client Acquisition
Find out which channels offer the best returns.
Imagine knowing which social media channel generates the most qualified leads for your business, as well as knowing which campaigns on that channel offer the best Return on Ad spends.
When you know this, you can keep your costs of client acquisition down and keep more of your cash flow.
Now it’s your turn.
Go ahead and check out how much you are spending on which social media channel and what’s the return on investment on each to find out your top-performing channel?
2b. Hire Operators to Deliver Service and Treat Them Like a Cash Flow Centre
Having no replacement for you as a business owner is common.
If you are in this situation, you don’t have the capacity to serve more clients. As a result, you cannot scale and generate more cash flow.
The good news is that there is a way out.
You can stop being the bottleneck in your business, and generate a lot of cash by bringing in operators, who can deliver most of the service to your clients and generate more cash flow.
During a coaching call, a female dental business owner said “ Shishir, I have reached my capacity and what do I do now?”
We talked about steps the patient has to go through from the first point of contact to completing the treatment and aftercare.
We established if there are 10 steps processes, she would only be involved in steps 1, 9, and 10, thus freeing up time that she would have spent on steps 2 to 8.
She implemented this and free up her time. Now, she was able to take on more patients while still having healthy cash flow margins by working with dental associates.
2c. Give More Business To Selected Supplies and Get Better Margin
It’s a simple strategy, however a very effective one.
Rather than working with so many suppliers, work with one or two reliable suppliers and give them all good business. In return, ask for better cash discounts which they’ll be happy to give because they are getting good business volume from you. This will improve your cash flow.
One of my clients did exactly this and now they 10% trade rebate year on year and save $92k a year, thanks to cash discounts from its two suppliers.
Bucket 3 — Reduce Expenses in Business
3a. Share Your Costs With Your Accountability Partner
Do you have an accountability partner?
If not, get one.
I get on a call with my accountability partner every two weeks.
We set our intention for the next few weeks. We also share how well we did on the tasks we set out to do, and keep ourselves accountable.
There is another thing we discuss. It is getting consistent cash flow and we share whatever resources helped us save on costs and hence improve cash flow.
3b. Improve Your SEO Rankings and Spend Less on Marketing
Business is a marathon, not a sprint.
There are some pragmatic entrepreneurs who know that marketing investments are useful for a business’s growth. They invest in PPC and Facebook ads to generate leads and sales. to survive.
But even such entrepreneurs undermine the potential of organic traffic growth and SEO.
The truth is that:
SEO is one of the best sources of traffic. On average, organic search leads have a 14.6% close rate, compared to 1.7% for outbound marketing leads.
If you don’t invest in SEO now you’ll have to start from zero from whenever you do. But if you start now in 9–12 months’ time you have an ever-growing source of high converting traffic.
Imagine a customer is in buying mode and they are looking for something similar to what you sell and your name comes up organically in search.
They will likely check you out and try to learn more about you and your work.
SEO-powered growth approach works because people are already looking for answers on Google and YouTube. And when they come across your page, they are more likely to trust you because they found you.
With this approach, And, you are not spending big budgets for brand awareness and lead acquisition so your cost per acquisition will come down.
This will improve your cash flow because you are gaining customers without actually spending on an ad.
3c. Take Advantage of Limited-Time Offers
As entrepreneurs, we should invest in ourselves and our business.
It would be wonderful to have an unlimited budget for such an investment. But that’s not the case. So, we need to choose and invest wisely.
Recently, there was this product that I really liked. I had gone through their webinar and realized that it would help me to move forward in my business. I noticed that on the Black Friday sales webinar the creator offered a special price. This price was lower than what was listed on the website.
But I also knew that at times they run a flash sale. I kept an eye out and lapped up the product at an even bigger discount than what was offered in the webinar.
This way I got what I wanted and would have bought anyway and got it at a fraction of what I had budgeted for this purchase. This way I kept money in the account.
You can do what I did.
Just keep an eye out for services, products, and programs that you need to buy to move forward in your business.
If you want to buy from a brand follow them regularly so that you know when they offer a discount.
You can also search when they offered such discounts earlier and if this is a regular feature and look at that time of the year. There are also annual trends like Cyber Monday and Black Friday when you can buy most products and services at a big discount.
I bought the product I referred to above for £500. In two weeks, I realized that I made a very good decision because the product helped me a lot in my business journey.
Think about what you need to buy to grow your business and then grab it at a discount?
PART 4: How To Improve Cash Flow by Systemizing the Business
So far in this article, you have got an overview of THREE AREAS — STRUCTURE, STRATEGY, AND SYSTEMS — that you need to focus on to improve cash flow, and then we looked at the STRUCTURE.
Next up, we went deep on STRATEGY TO IMPROVE YOUR CASH FLOW, so that you could invest in sales and marketing and grow your business and income.
Now, let’s take a look at how you can IMPROVE CASH FLOW BY SYSTEMISING YOUR BUSINESS.
Now, we are going to go deep into systems and take a look at how you can IMPROVE CASH FLOW BY SYSTEMISING YOUR BUSINESS.
I am going to share with you six areas to focus on to completely streamline and systemize your business so that the systems can do the heavy lifting for you and you can focus on cash-generating activities and improve your cash flow.
Let’s get started.
You’ll learn more if you worked with me on this as you read this article.
So grab a pen and paper. and write S.Y.S.T.E.M across the page and record what can you do to set up systems and processes in different parts of your business.
Let’s start with the letter S.
S is for Sales, Client Onboarding, and Payments
For context, many of these videos come from my experience, of working with my clients, like those who work with me in my Income Accelerator Program.
So a career coach who I work with, within the Income Accelerator Program told me that despite using QuickBooks accounting software, she still sends invoices to her pdf invoices manually, and her bank account is not connected to Quickbooks, for transactions and payments received.
So, she connected her bank account with Quickbooks and GoCardless and the whole process of sending invoices and collecting payments became seamless.
Thanks to this system integration she was able to send invoices as soon as the work was completed and provided multiple payment options for her clients and as a result, most of her clients paid on time and this improved her cash flow.
The biggest win for her through all this was that she was able to save at least 2 hours a month. The time she can now use these 2 hours the way she likes either to spend time on self-care, with her loved ones or working on growing her business instead of sending invoices and collecting payments.
Y is for Yourself
If you are stuck trading time for money and cannot release yourself from being the bottleneck in your business, then you can’t focus more on cash-generating activities.
So you need to manage yourself and maximize your time output.
Here’s what you can do.
Start tracking how you spend your time. Do it for a quarter.
Then go through your timesheet for the last 12 weeks. This will give you an idea of where you are spending your time. You can see if you are spending your time on:
- Cash-generating activities
- Non-cash-generating activities
For cash-generating activities, focus on 3–5 products that offer the most time return on investment.
For non-cash-generating activities, follow this process:
- D — Delete the tasks that don’t need to be done and still your business will run smoothly.
- A — Automate if you can’t delete the task, then see if it’s possible to automate it so that the system does the heavy lifting for you and save you time, and money. Another side benefit of automation is accuracy. For example, many data entry tasks can be automated, and by doing that you save yourself from a human error which is common when a lot of data is entered.
- D —Delegate if you can’t delete nor automate then delegate to someone in your team.
This way, you will be able to be in your zone of genius. You will be able to focus on generating cash flow and thus will improve your cash flow.
S is for Suppliers Management
Whether you get a few invoices or a lot of invoices from your suppliers, it’s good to have a system and process to capture the costs and feed them to the accounting system.
There are brilliant apps like Receipt Bank (which has now rebranded as Dext), Autoentry, and Bill.com. All these apps capture cost and push it through the accounting system and save your time. These apps also help you to have all the bills in one place and save time processing them. This, in turn, makes the job of your accountant who files your taxes much easier by having all info in one place. This will save you costs and improve your cash flow.
T is for Transactions
You need to keep a record of sales invoices, supplier invoices, bank transactions so that you can record what has happened in your business. Accounting software such as QuickBooks Online, Zoho Books, and Xero can do this task for you, with you being stuck in spreadsheets and thus save you time. You can then invest the time you save in cash-generating activities.
E is for Employees Management
You need a team to grow your business. Building a team requires cash investment. And when you have invested in building a team, you need a system and process to work effectively and efficiently to maximize output. So the tools like Monday.com, Airtable, Zoho Connect, and Asana, etc can help you run your business operations smoothly allowing you to focus on cash-generating activities and improve your cash flow.
M is for Marketing
Marketing is crucial to your success in business. Having a lead gen system and process allows having a steady stream of clients wanting to work with you and improve your cash flow.
There are tools like Clickfunnels, Leadpages, Kajabi, and Hubspot that can help you with marketing automation, save you time, and generate leads to improve your sales and cash flow.
There you have six areas to streamline and systemize your business so that you can focus on cash-generating activities and improve your cash flow.
If you want to go deeper into the tools that I use in these six areas, then head over to ShishirKhadka.com/AIAD and sign up for An Idea A Day (AIAD).
Once you sign up, every Thursday you’ll learn more about a tool that will help you automate and systemize one of these six areas.
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If you like videos more than words, then I published a series of videos with the same content, you might want to check these out below.
