Hunting For Business

Albatross · May 2007

My line of work, a renovation firm is having severe cash
flow issues. Sometimes we have 1-2 month periods where we make unbelievable
business (one of these was due to a flash flood, which meant a lot of basement
repairs), and 6 month periods after where we`re barely keeping our head above
water. I think the problem could be resolved with either reducing our expenses
to make money stretch or to increase our customer base. Our marketing is
primarily by word-of-mouth and it`s worked pretty well for us so far. However,
marketing is not my forte and I`m wondering if anybody out there has any advice
for how to proceed.

InactiveMember · May 2007

Marketing is *not* the solution to cash flow problems. Cash management is the solution to cash flow problems. Do you mind if I ask how much experience you have managing cash? One method of managing cash flow involves a revolving line of credit - even an overdraft although I don`t recommend it. But if you don`t have access to a line of credit then you have to build a cash reserve with two or three months of operating expenses. If this seems hard, well, cash flow problems are harder, right?If you don`t have much experience managing cash, or are continuing to experience cash flow problems, talk to your banker or accountant. Bankers and accountants tend to know a lot about cash management. Or you could find a book.Can anyone here recommend a book on cash management? I`ve read stacks of books on finance and accounting but I cannot think of a specific title that deals with cash flow.

Albatross · May 2007

Hi CookieMonster, thanks for the inputThe thing is that I already have a line of credit, and if I approach the bank about cash flow problems, I`m worried that they`ll get nervous and yank my line of credit.What I was thinking was to make my business have more steady work when things like flash floods don`t happen and business isn`t booming. Some of my competitors for instance, don`t have this problem because their businesses are more established. How do I go about building a larger presence and a bigger source of clients?And in the meantime what do I do about unexpected cash flow hits,like having to replace the transmission on one of my trucks?
Albatross2007-5-28 19:39:33

InactiveMember · May 2007

I think some education on cash management would help. Of course I don`t know your background or your experience, but I found that knowledge was helpful. Even with steady business or more business, you have to learn to manage cash. This is more involved than saying "yes" or "no" to various expenses and so forth.1. Find another banker or accountant if you don`t want to approach yours. Or find someone, a mentor, a successful business owner you know. There are people who know how to manage cash and they can teach you a lot. I`m not saying that you "don`t know what you`re doing".2. If you are having cash flow problems, you are not managing your cash properly. Regardless of what you think or believe. Perhaps it`s a management issue or perhaps you have to float materials costs on too many jobs. I have no idea. But you should address this before you think about marketing because it`s perfectly easy to have cash flow problems when you have adequate work. In fact, it`s probably worse. So that`s my ten cents.Marketing on the other hand, especially in your line of work, can be difficult, especially if the market is saturated. You`ve mentioned your competition...The first step to successful marketing is some kind of market analysis:Five Forces Market Dynamics ModelOnce you have a map of the market, you might be able to determine a sustainable competitive advantage and then develop a communication strategy. The communication strategy would help you reach prospective customers and show them why your products/services are relevant. Very often in the construction industry - and I`ve advised several companies in this area - there are either price ways, bidding wars, etc. and the job often comes down to price or so the contractor believes. So a good marketing strategy on your part might include finding a way to justify a profitable bid...What I`ve learned from my previous experience with construction and contracting businesses is that landlords or property owners often provide a steady stream of work. But they are typically nervous about having all their eggs in one basket. Repeat customers are always good. How much repeat business do you get? A little? A lot?Unfortunately "coming up with marketing strategy from scratch" isn`t easy. You could run advertisements if you want or hand out business cards all over town. But these are tactical level events, not strategic. If you want to do this right, you have to address your market access strategy and so forth.

Albatross · May 2007

Hi guys, thanks for all the inputI think the idea about finding a marketing guy or a mentor to look for ideas is a great one and i am currently looking for one.nhgnikole, I really like your idea about partnering with other contractors in the area and I already can think of a few people who might be game for that. CookieMonster, your link to the 5 forces market dynamics was a good one, and something I`ll be exploring until I find someone to talk to. Thanks again

crazydiamond · May 2007

Well, this looks like a good question.CookieMonster and nhgnikole have given pretty good answers to you, All I would add is that while CookieMonster made a good point about cash flow, it sounds to me that what you need to do is construct a cash behaviour model. I`m assuming that you have enough money over your fiscal year to keep your business afloat, so the problem seems to be that you have long periods where you are in the red, drawing on earlier savings/credit. What could help is to start planning your finances around what you expect your business to be like (i.e. if you can predict at all high and low points in your fiscal year). That way you might be able to defray some of your expenses to a better period without having to use your line of credit. And while you do that you step up your marketing campaign so that your profits aren`t always tied up servicing debt or hidden away for the slow periods.If you would like more advice you could try my site at http://www.harbourforum.comBut I hope what myself and the other commenters can solve your situation. Good Luck!
crazydiamond2007-5-30 0:5:52

ScottJ · May 2007

Guys,
My background is in database management and customer prospecting. While I agree with all the advise given there may be some simpler things you can do to help. Put an ad in your local ValPak coupon mailing with the areas you specialize in. Create a letter and drop it to all the neighbors of somebody you worked with, state what you did and use that person as a reference. Of course you will want to ask permission and maybe give the original person a 10% discount for participating. I could probably think of a dozen similiar ideas that are very inexpensive and will generate more business. As you build your customer base stay in touch with them, they will eventually have additional needs and the biggest mistake many businesses make is letting themselves be forgotten. Hope this helps

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