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The Growth Triangle – Business Growth, Cashflow and Profit

Most will understand the importance of cashflow in business. But often without realising, businesses can build a cash gap. This is the time between when a business pays cash out and makes purchases, to the date the cash is received in from customers and debtors.

It’s important for small businesses to recognise the potential impact this could have on business. For this we need to understand the true important of cash flow. Business owners and leaders don’t want to arrive in a situation where they need to cover the difference, through factoring or bank financing.

To understand the power of cash flow and its impact on business growth, Ray Moore explains ‘The Growth Triangle.’

At its most basic, the model presents the idea that business growth produces more profits for the business, which gives a healthy cash flow which can be reinvested in growth.

But is this really the case?

The second part of the model shows other areas that influence the Growth Triangle. In a more realistic light, profits in the business can become caught up in the balance sheet before creating cash flow. This could be because we’ve given extended credit or we haven’t chased up our debtors for payment.

So what started as profit doesn’t come out of the balance sheet as cash, which restricts how much we can put back into growth.

We may then use the cash flow we’ve got to purchase new machinery or vehicles, so there is even less cash to push into business growth. However, the amount we do invest into business growth then starts to produce more costs in the form of overheads, therefore it doesn’t produce the same amount of profit as before.

This is why business owners often say they made more profit when they were a smaller size and why many business owners settle on their business being a smaller size.

Preparing for business growth

As important step in preparing for business growth is to ‘Set out the Stall' and look at each of the filters in the Growth Triangle so that growth doesn’t drag in more cash, without making a profit. Ensure that your return on investment calculations are correct and identify the assets that create growth and profitability, whether is people of machinery.

By doing this, you can efficiently build up a cash reserve and be prepared for the extra amount of cash and investment you’ll need for the business growth. You’ll also have the awareness of which investments are the most important to your business model in order to produce the best return of your investment.

For more on business finance and accounts, join Ray Moore's on-demand webinar – Accounts: DEBUNKED. 

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FBP 124: The Growth Triangle

Cash is one of the key drivers in business and a lack of cash restricts growth in small businesses. In this episode of the Fluid Business Podcast, Ray Moore explains the Growth Triangle, which is a visualisation the process of business growth, profits and cash flow.

Click here to download the diagram.

If you’d like to view the Accounts: Debunked webinar, click www.fluidbusiness.co.uk/accounts-debunked/

Our team of professional business coaches share their expert knowledge and experience every single week, empowering you, the business owner, to develop and grow your business the right way.

Join us as we cover core subjects areas in our unique and relaxed way, including: Rapid Growth, Family Business, Team, Efficiency and so much more.

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FBP 123: What Is The Next Milestone In Your Business?

Do you know what the next milestone for your business is? In this episode of the Fluid Business Podcast, Andy Sleet and Ray Moore are discussing how milestones can help to keep the momentum going in your business. They also share practical advice to help you achieve your business objectives.

You can read more on this topic on the Levels Blog.

Our team of professional business coaches share their expert knowledge and experience every single week, empowering you, the business owner, to develop and grow your business the right way.

Join us as we cover core subjects areas in our unique and relaxed way, including: Rapid Growth, Family Business, Team, Efficiency and so much more.

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FBP 122: How Well Do Your Customers Know Your Business?

Do your customers know all the products and services your business offers? Andy Sleet and Ray Moore share why you shouldn’t make assumptions about how much your clients know about your business. They also share some tips and tricks on how to spot opportunities with your existing clients.

Our team of professional business coaches share their expert knowledge and experience every single week, empowering you, the business owner, to develop and grow your business the right way.

Join us as we cover core subjects areas in our unique and relaxed way, including: Rapid Growth, Family Business, Team, Efficiency and so much more.

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How well do your clients know your business?

One of the key drivers of business is ‘Delivery.’ This refers to the consistency and quality of your products and/or services and is usually a focus for business owners. However, for most business owners the priority is driving sales and finding new clients. This can lead to your current, most valuable clients being forgotten.

You’ll be aware that there are some customers that are more valuable to your business (your ‘ideal’ clients). But are these clients aware of all the products and services your business offers? Maybe you’ve told them, or mentioned it in the past. But do they have a full understanding and awareness of everything your business offers?

It’s a well-know fact that getting new clients to purchase from your business is much harder than selling to your existing clients. So what are you doing to identify new opportunities with your existing clients? Getting a true understanding of your customers will help you to sell more. The more you know about their needs and the products or services they use, the easier it is to see opportunities for your business.

TIP

Take some time to get to know your clients, consider using a spreadsheet to register:

  • What your clients currently purchase from you
  • What they use, but purchase elsewhere

Use this information to spot the opportunities and build offers to create awareness.

You might notice a spike in sales as your customers become aware of the wider range of products and services your business offers. And, even if some decide not to purchase with you now, your business will become a suitable alternative if something changes with their current supplier.

This process of getting to know your clients is important for more than the reason of cross/up selling. Having a deeper and clearer understanding of your clients, their needs and current suppliers, you’ll get a better understanding of your target market. Use the information you’ve learnt to build customer profiles and segments that can then be used in your marketing efforts.

The key benefits of getting a true understanding of your clients, and for your clients to have a true understanding of your business are to:

  • Build better relationships with key decision makers
  • Improve awareness of current clients needs
  • Meet client needs more effectively
  • Profile/segment your target audience
  • Increase effectiveness of marketing

For more on this topic, tune in to Episode 122 of the Fluid Business Podcast:

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FBP 121: Great teams know who they want on their bus

The ‘bus’ analogy is a well-known, sometimes over-used, concept when talking about teams. On this episode of the Fluid Business Podcast, Ray and Andy give a different perspective on this concept and discuss seven questions business owners need to ask themselves and their team.

Read Ray's blog post here: http://www.thelevelsblog.com/great-teams-know-who-they-want-on-their-bus/

Our team of professional business coaches share their expert knowledge and experience every single week, empowering you, the business owner, to develop and grow your business the right way.

Join us as we cover core subjects areas in our unique and relaxed way, including: Rapid Growth, Family Business, Team, Efficiency and so much more.

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12 Days of Christmas Giveaway!

It’s that time of year again and we’re starting to feel festive!

For the first 12 days of December, we’ll be giving away a whole range of business-growth tools to help you and your business become the best in 2018. The grand total of all the prizes we’re giving away is £4,000!

Each day we’ll tell you how to enter and you’ll be in the draw to win a whole range of prizes, absolutely free! To receive daily updates, simply follow us on Twitter, LinkedIn or Facebook, or alternatively you can register for email updates below.

On the first day of Christmas (December 1), we’ll be giving away 25 free copies of Ray Moore’s first book: Can Your Business Step Up To The Growth Challenge? (RRP £11.99). Registration opens at 9 am and will be open to all small business owners based in the UK.

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Growing a Business: The Four Drivers

Business owners often believe that by investing more time and hard work, their business will continue to grow. But unfortunately (or fortunately!) that’s not the reality of business growth.

Sheer hard work and investing all the hours of the day into the business will help you to grow your business in the early days. But, as the saying goes; what got you here won’t get you there!

The reality of business growth is periods of growth, followed by a plateau, which is a cycle that repeats over time – this is the Levels Framework for growth.

Start-up businesses can often grow through a couple of plateaus quickly, but can end up falling into the trap of becoming stuck on a plateau for a long period of time and the business owner tends to accept that the business has grown as much as it can.

The drivers

There are four drivers that are active in every business, these are:

  • Time
  • Team
  • Money
  • Delivery

During periods of growth, one or more of these drivers will go out of balance. For example, you might be so busy with orders and running the business that you don’t have enough time to fully train your team. That results in the delivery of your service slipping and customers become unhappy. So you end up loosing customers and money and the drivers naturally rebalance on the plateau.

When the business reaches a plateau, each of the four drivers are balanced. When a business grows and the drivers go out of balance, it’s common for the business owner to feel out of control and often the business forced down to the level (or plateau) below.

Growing a business

Sometimes a business will grow and become larger in size, but they make less money than when they were smaller. It’s a common symptom of businesses that have failed to set the business up for growth. The business’ infrastructure and team isn’t ready to undertake a period of intense growth. ‘Setting out the stall' is covered in much further detail here.

Achieving a balanced business is so important for success and work for everyone involved. The business owner will have more time, the right people will be doing the right things, there will be more cash and customers will be better serviced.

 

If you think you’re up for the challenge, join our 10-day business growth programme! Ray Moore goes through how to balance each of the drivers in further detail. It’s available for FREE at www.fluidbusinessacademy.com.

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FBP 120: The four drivers of business growth

In this episode of the Fluid Business Podcast, Ray Moore and Andy Sleet are talking about the pattern of business growth.

Listen as Ray explains why businesses don’t grow in a straight line and why it actually involves a series of growth and plateau. Ray and Andy explain the role the four drivers play in business growth.

Our team of professional business coaches share their expert knowledge and experience every single week, empowering you, the business owner, to develop and grow your business the right way.

Join us as we cover core subjects areas in our unique and relaxed way, including: Rapid Growth, Family Business, Team, Efficiency and so much more.

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FBP 119: Back to Basics: The power of true clarity

Following our ‘Accounts: Debunked’ webinar, Ray and Andy are on the podcast discussing the meaning of ‘debunked’ and what’s next in the series. Ray introduces Management: Debunked, where he’ll be joining HR expert Paula Fisher for a two-part interview.

Sign up today for priority access.

Find out more about the speakers and the topics to be covered.

Catch the Accounts: Debunked webinar on demand.

Our team of professional business coaches share their expert knowledge and experience every single week, empowering you, the business owner, to develop and grow your business the right way.

Join us as we cover core subjects areas in our unique and relaxed way, including: Rapid Growth, Family Business, Team, Efficiency and so much more.