Small businesses are in economic recovery mode, but some might agree with me that it has been slower than anticipated. In an end-of-year survey, Wells Fargo reported that "only 39 percent of small-business owners experienced an increase in company revenues over the past 12 months.
At the same time, 47 percent expected cash flow and revenues to increase in 2016." Given a still-far-from-ideal financial picture, we asked three small-business owners—Fritz Heffinger, founder and president of event marketing firm OutCold in Chicago; Diana Goodwin, founder and CEO of AquaMobile Swim School in Toronto; and Shawn Schulze, CEO of SeniorCare.com in St. Louis, Missouri—what their cash flow management techniques are this year.
Why is cash flow management a critical skill for small-business owners?
Fritz Heffinger: It’s important to learn how your sales go—when your peak times are and when to expect a slowdown. In a perfect world, sales are steady all the time, but any small business knows that is not the case.
Diana Goodwin: Cash flow management is extremely important! You don't want to be stuck in a rut, unable to run a critical marketing campaign because you didn't properly manage your cash. Something like that could cripple your business and impact your sales for the coming year, putting your company in a downward spiral.
Shawn Schulze: When a business has cash on hand and cash reserves, it has much more control. Without available cash, a business relies on debt or new funding sources. Businesses that are operating day by day or have lots of debt are just one unexpected event away from desperation mode. In addition, interest on debt is a costly expense.
How, or where, did you learn to manage your cash flow?
Schulze: After over 10 years in business, I still have a fear of what may happen that could hurt our existing cash flow or require a large, unexpected expense. This fear is great motivation to ensure that we are conservative in our projections, in our expenditures and also in the amount of money we maintain on hand.
Goodwin: My company AquaMobile is a seasonal business, so I knew right from the outset that cash flow management would be important. From there, I’ve just made sure I’m always aware of our current spending and future cash needs.
Heffinger: I wish I could say I read this book or had someone on staff, but it has been a trial by fire. I have had help from a good friend who works at a large bank, but our business is so unique that it was a risk in the beginning.
For the rest of the interview, head over to the AMEX Open Forum.