So you are looking at the Profit and Loss Statement for your business and things seem to be going pretty well. You’re bringing in more than you are spending (or so it appears) so you should be rolling in money, right? Then you go to pay a vendor or make payroll, and your perspective changes.

What you thought was a surplus is now a shortage; you have to dip into savings (or expensive credit) just to pay suppliers or your employees. When the smoke finally clears, and you have time enough to breath and figure out what happened, one question remains on your lips: “Where in the heck did my cash flow go?”

What is Cash Flow?

To understand what is going on here, you first need to understand what cash flow is. Basically, cash is the amount of liquid assets you have on hand, and flow refers to the direction that cash is traveling. Cash flow, then, is the amount of cash or easily-converted assets moving in and out of your company. If you accumulate more cash than you are putting out, then you are said to have positive cash flow. If cash is moving out of your business, it is said to be negative cash flow. Ok a dump comment here but, it is good to have positive cash flow, while negative cash flow is something to be avoided.

How is Cash Flow Different from Profit?

So if you are pulling down a good profit, you should have great positive cash flow, right? Not necessarily. You could have lots of Net Profit and still not have positive cash flow. Why? Because positive cash flow and profit are not the same thing. You can incur a loss and still have plenty of cash on hand. Alternatively, you can post a profit and not have enough cash. Your position concerning available cash depends on the revenue coming in as well as the ability to quickly convert assets to cash. If you are a manufacturer moving a lot of profit, for example, your potential profit might depend on things like how fast your clients are paying you and how much inventory you are holding. Two areas that usually suck up cash are slow payers and increasing inventory on hand. Cash gets lost in the balance sheet.

What Causes Negative Cash Flow?

As you can see from the example above, many factors can cause negative cash flow. If you are making a profit but still are short on cash, it is important to track down exactly where your money is going. If you have had a record sales year, for example, but many accounts are not current, you might want to determine what is going on. If a sizable number of clients have not paid yet, you would need to determine why. Sometimes it is a matter of sending accounts to recovery agents, and sometimes some other problem might be holding up the process, so it is important to get to the bottom of things before determining your best course of action. This is around using the correct processes. Alternatively you may be increasing inventory on hand which it like getting you hard earned cash and sticking it on the selves rather than in the bank. A killer when you find overtime the extra stock doesn’t sell and becomes SLOB stock. It’s like putting a $1.00 on the selves, expecting to sell it for $2.00, and then it doesn’t sell and becomes old technology or fashion and then can only be sold at a bargain price of $0.50c. That’s another sleepless night.

Now You Know

Now that you know what cash flow is and why your cash may be flowing the wrong way, you can formulate strategies for turning things around. I know I have only highlighted a couple of cashflow areas and there are many more, but once cash is flowing back into the business, it is a good idea to monitor cash flow regularly to make it continues to do so.

You might have heard of the term Unique Selling Proposition (USP). It refers to the thing about the product or service you are marketing that sets it apart from all the other similar products. Marketers often focus on this to the detriment of other factors. At the same time that they are looking for things that make the product or service unique, they might also determine how to show that their product is just as good as—and mostly the same as—its competitors in ways consumers care about.

We don’t need to stand out completely from the crowd.

The Delorean, for example, was a unique automobile in many ways—stainless steel body panels, gull-wing doors, etc.—but was so different from other cars that many credit its uniqueness as one of the reasons the car (and it’s company) were not ultimately successful. It is important, then, to keep in mind other factors when positioning a product or service on the market.

What is “Point of Difference?”

“Point of difference” refers to the factors that make your good or service different from other products or services against which they are competing. Showing how your product or service is different can go a long way toward making your case for why consumers should buy it. If I am selling computers, for example, and my computer has a faster processing speed, is lighter, or has more memory than others in the same price range, you might call those factors “points of difference.”

What is “Point of Parity?”

What happens though—as with the Delorean example above—if your product or service is too different from others? Or what if the product or service is different in ways that turn consumers off? For instance, what if the computer you sell is different because it is more expensive than others with similar features? It is important, then, to balance “point of difference” with “point of parity”—the factors that make your product or service comparable to competing products and services. If the computer you sell is comparable in price to other computers but is faster, sturdier, lighter, or otherwise better in some way, you have probably balanced the “point of difference” with the “point of parity.”

What does it Mean for a Marketing Strategy?

“Point of difference” and “point of parity” should both be considered when positioning a product or service on the market. It is important to understand exactly how your product or service stacks up with the competition. At all times, keep in mind what makes it comparable and what makes it different, and let that guide you toward determining what makes it a better product or service.

I really do welcome your thoughts on this balancing act.

I like the way some modern leaders think. Business to me has been far more than financial success, it’s the people involved and the families touched that are important.

Too often, businesses and their leaders get called out for something negative: moving jobs overseas, not treating employees fairly, being at odds with local communities, etc. However, some modern business leaders make the news for displaying positive people focused attributes maybe contradictory to financial returns. These qualities are ones to which we might all aspire in a small way with our businesses. While I have used some American examples below, the ethos of what they done can easily transitioned into our New Zealand SME’s.

They take care of their own:

The attacks of 9/11 hit the American economy hard, especially its airline industry. As a result, most carriers initiated massive layoffs almost immediately after the attack. Southwest Airlines, though, recognized the importance their workforce and, days after the attacks, announced that it would not be laying off any of its employees. As a result, Southwest continued to be a popular discount carrier, gaining customers even as other carriers stripped down their level of customer service.

Transparency:

Most people do not think about transparency when thinking about business leaders or corporate structure, but it turns out that some leaders are paragons of transparency. One example comes from Toyota, who had a potential PR disaster on their hands in 2010 with a recall on brake parts for many of their vehicles. Instead hiding behind a spokesperson, or ignoring the wrath of angry customers, Toyota executives instead put on a Q and A on a social media site. This gave customers a chance to air their grievances and Toyota executives a chance to listen.

Humility:

When real estate agents blacklisted the Redfin for giving back two thirds of the commission most brokers charge, CEO Glenn Kelman wrote a self-effacing blog revealing the ugly truth about the real estate business. This public baring of his corporate soul has only led to increased business.

Another example of humility is Costco CEO Jim Sinegal, who works out of a small office, answers his own phones, and only (in American terms) collects a salary of $350,000 per year. His humility makes him approachable to employees and has led to employee loyalty in an industry plagued by high turn-over.

Compassion/Empathy:

The stereotypes usually paint corporations and their leaders as heartless and uncaring. For some leaders, though, that couldn’t be farther from the truth. In the late 1990s, for example, Starbucks CEO Howard Schultz flew to Washington D.C. and met with employees and families alike after several employees were killed in an in-store shooting. Toro, the lawn equipment company, makes compassion a big part of their business model, sending executives to meet with family and friends of those hurt or killed in accidents involving their equipment. The number of lawsuits related to these deaths has dwindled exponentially since they started doing this, but it is also just the right thing to do.

Trusting Employees:

In the late 1980s, TDIndustries was on the verge of bankruptcy. Instead of filing, though, they decided to trust their employees. The company disbursed the retirement fund to all of the employees, with a request that employees would invest the money back into the company. Employees actually invested more than what TDIndustries paid out, and the employee-owned company still thrives today!

Not a bad set of five very nice qualities.

If you ever catch yourself saying you don’t have enough time consider this: the length of the hours available to you are the same as those that Michelangelo, Pasteur, Mother Teresa, Albert Einstein, Leonardo da Vinci, and Thomas Jefferson had available to them.

The fact is that we all have the time to achieve what we really want to achieve. What we have to be aware of is that there are so many demands on our time - e-mails to check, things to organise, calls to make, errands to run - and taking all of these things into consideration we need to find a way to Work Smarter, Not Harder. It is simple as taking ownership of time and managing it rather than time managing you.

This involves trying to be thoughtful about what we have to do, and constantly asking if things could be done more efficiently or whether they need doing at all. Managing time is not about squeezing as many things in as possible. It’s about simplifying how we work, trying to complete things faster, and relieving the stress that is bound to build up.

We need to clear space in our lives to make time for the really important things that make it worthwhile: people, rest and play. There really are more than enough hours in every day for all the things we would like to do, but it takes rearrangement and re-imagination to discover them.

There are many different strategies we can employ to chisel out the time we need. First is time management's golden rule: complete the most important tasks first. We then need to grasp the concept of starting early and starting often. Procrastination is the thief of time and effort.

In order to do this we also need to learn to be more willing to say “no”. Taking on too many commitments can really sap our energy so we should only commit to tasks we know we have time for and that we truly care about.

Get plenty of sleep. We all know when we are getting enough. It's important to listen to our bodies, and not to underestimate sleep's true value.

When we tackle a job it cannot be emphasised enough that we need to devote our entire attention n the task at hand. We can all allow projects to take a lot longer than they should by getting hung up on details that don't matter. Don't. Move on.

Instead of sitting down and thinking, this is going to take as long as it takes, start setting yourself your own realistic deadlines . Also rushing from task to task kills motivation. We need time to take a breath and allow our brains and bodies to catch up, otherwise there is a high likelihood we may be wasting valuable time.

Much of our lives is full of excess. If it's possible to recognise the excess and remove it, we can become much in touch with what's significant and what deserves our time. And remember work should not be a chore. It should be fun. Grasping this is the key to time management.

As a business owner one of your most important on-going tasks will be hiring the right team.

To be sure, it's far from easy. Not only is it time-consuming but there are financial and reputational consequences to consider. Bad hires are most definitely bad for business. What you need is someone who is not only technically capable but also trustworthy, conscientious and the best fit for your business.

Businesses that master the hiring process are able to attract high-quality candidates, evaluate them in a variety of different circumstances, and take time to really get to know the people in many different ways.

To start a successful hiring process it's important to write the best job descriptions. The words you use for a job posting can deter or attract the candidates you are seeking from applying. Studies have found that long lists of requirements and responsibilities alienate qualified employees. The research indicates that instead the focus should be placed more on what your business can do for potential employees.

Let's face it, most people want to work for businesses that are up to speed with technology trends. Indeed, one survey carried out by MIT and Deloitte discovered that most respondents, in the 22 to 60 age range, are attracted to work for digitally enabled organisations. This includes ensuring your business is mobile-friendly. A growing number of applicants use their smart phones for job searches and this usage is carried through to the jobs that we do.

Another very important aspect that needs to be born in mind is that skills can be acquired, personalities cannot. Being able to navigate social situations and working well with others are crucial skills to watch out for in candidate appraisals. Interpersonal and communication skills as well as thought processes and emotional intelligence matter.

The importance of personality cannot be overemphasised. The type of kind of person you hire is dependent on your business's culture along with the type of job. The same person with all kinds of skills may fit well in one business but would be bad for another. The trick is to get the emotional intelligence aligned with the business. So using questions within the adverts like:

Do you walk fast?

Do you have a positive energy and can get things done?

Are you proactive and want to help people when needed?

To establish the candidate's suitability is most efficiently done at the interview stage. But according to research by Leadership IQ failures associated with new employees may be down to their interviews being flawed. As many as 82% of the 5,000 managers Leadership IQ surveyed said that interviewers were concentrating on the wrong issues, were too rushed or lacked the confidence to pay attention to any warning signs candidates exhibited during the process.

Interviews should not focus on whether applicants are technically competent. They should instead concentrate on factors like emotional intelligence, temperament, coachability, and motivation.

Asking the right kinds of questions is key to the process. Some great questions to chisel out ambition and motivation include: "Who are you expecting to be ten years from now?" and "Why do you get up in the morning and tackle what you do?"

Then allowing candidates to interview you will also provide an opportunity of seeing what they think is important.

It isn’t a perfect science but if the personality fits you have a far better chance of success.

There are few things more exciting that deciding to go into business on your own. Rather than facing the blank sheet of paper and starting your business from scratch buying an established business could be the best way for you to get started in New Zealand. I have done both and are perfectly aware neither is easy but pre-existing does have advantages.

There are significant advantages to investing in a business model that is already proven and taking on an existing business which has customers already with the all-important cash flow that goes with them.

There are various ways to find the business for you in New Zealand. You could start by contacting a business broker. These will generally at any one time have a number of businesses on their books for sale. Some brokers specialise in specific sectors and can offer industry advice and point to opportunities. It should always be remember though, that these brokers are working for the sellers, plus the better the sale price they can attract, the bigger their commission will be.

If you are sure what you are looking for these days a lot of people choose to search online.

You will be spoiled for choice if you search for "businesses for sale in New Zealand". There will be a huge variety of websites with businesses up for sale.

Another way to find business opportunities is through local Chambers of Commerce and the Economic Development Agency. These will know of relevant and trade associations who will know of opportunities in their area.

Professional advisers, like the big law firms and accounting companies, can not only help investors buying a business by providing the necessary financial and legal services, they may also have useful guidance on business opportunities.

Then there are Business Advisors like Advantage Business Limited who have hundreds of businesses working with them on a daily basis of which some are being prepared for sale. If you would like to get a ground floor opportunity then we are a great option.

With these methods of selecting a business to buy an increasing number of people are making the leap, especially as the economy improves.

In New Zealand the brokers are reporting that many people are looking to "to buy a job'' and are in the market for businesses being sold for less than $150,000. A lot of these are using redundancy money to buy businesses that will give them an income while they build the business up gradually.

When you are looking for a small and medium enterprise (SME) to buy it's a good idea to make sure it has the potential for a lifestyle fit. Look at the businesses that interest you and which you feel you could run and you would be happy to call your own.

Take time; visit the businesses you choose incognito so you get a feel for the business without anyone being aware.

Identifying the business to own is the easy part. Buying it can be a bit trickier. Once the purchase decision is made it's time to get serious, because negotiations and due diligence need to start. You will need an accountant and a lawyer as well as possibly other advisers.

A business sale is bound to involve a lease so a solicitor needs to be involved to make sure your tenancy is secure. The due diligence process ensures any information provided is accurate correct and is usually carried out by an accountant who is looking for the business's viability.

It is essential you meet the owner of the business you are buying. This is where you find out why the owner is selling and how much he thinks you can expect to take out of the business as it is.

I love this part of my Advisory Practice and would be very happy to help anyone, even if it is just a friendly chat.

With 97% of New Zealand businesses having less than 20 employees, we are a nation of small businesses. There are many ways that this smaller size helps owners, its more manageable and so on, but one area where SMEs face unique challenges is in their sales and marketing operations.

If you look at any marketing guides they talk about large, multi-platform campaigns that are expensive and take a lot of manpower to run. Everything is scalable of course, but for small businesses going big on a marketing campaign is a problem. Firstly, you may not have the available people or technical skills, and secondly, unlike large multinationals, most small businesses cannot afford to have a large campaign that simply fails to perform, cashflow wise it can really hurt.

So, what approaches are out there for small businesses that will be affordable, that can be achieved and do see results? Audience engagement, it matters, it works and with some planning is easy to do. You still need marketing campaigns, but audience engagement across social media is the way to maximise the potential of your marketing. A potential customer who responds to a campaign is still a potential customer even if they do not make a purchase that time. By encouraging engagement with social media accounts the connection is maintained, and that is where audience engagement comes in.

Building that social media following over time is incredibly valuable, from customers to prospects, to simply people who show an interest, they are all important. Having regular contact with them through social media engagement allows you to consistently market to them, but the key here is the balance between marketing and simply talking.

To gain value for social media, be active, and find content that will add value. The biggest mistake many companies make here is to treat every message as a marketing message. This will push your audience away, and worse, stop them sharing your posts and building a bigger audience. Instead, find interesting, funny or informative things to say relating you your market. Have a personality and let it out for the audience, be more than a brand, be human. This kind of engagement pays off over time because, while you may not send marketing messages in every interaction, you do build a relationship, and the once a week or so you send marketing material, the response rates will surprise.

It is somewhat ironic, but in the digital world, it is the relationship, the personality, the human touch, that really makes the difference. Engaging that audience pays dividends long term, and it does not have to be complicated. Far from it, but it does need to be regular, professional and well managed. Using simply tools to schedule posts so they appear at a regular time can help, but most of all remember that this is a two-way conversation. Respond to comments and reactions, build that relationship, and every marketing campaign you run will build on the work you do.

Leadership is a commonly used word, and we all know the dictionary definition, but for SMEs what does leadership really mean today? When launching an SME, leadership is all about the idea and the drive to make it happen, the force of character to create something new from scratch. As a business matures, leadership is then a little different, the business needs careful people management to grow and provide the environment for innovation and success, but today, as the world around us all is still changing rapidly, what is the essential leadership skills a business needs today?

If we think about the business environment we operate in now, we are still in the middle of a digital revolution. Computers first, and then connected smartphones transformed how we do business, but that is not the end of the process by any means. Today we face the rise of the robots, with the potential for driverless cars and 3D printing to transform almost every market sector in a way never seen before. The impact of such digital disruption remains unknown, as does the real timescale of such innovation, but it is clear that this is not going away and it is something facing every SME today.

When faced with such a situation, businesses today need’s something different, leadership that focuses on today’s operation and today’s profits is simply leading the business into disaster. The leadership needed today, to avoid the problems coming, is vision.

Not just vision, but courageous leadership that can grasp that vision for the future and work to make it reality. Leadership that waits until the revolution arrives before it responds will probably tell you it is playing safe, but if a business is not well on the path to change before that new digital revolution arrives, it is too late.

We can all have those leadership qualities if we want, for some it may come naturally, others not, but as we change our approach from business launch to established business, we can all do the same when faced with future threats. The challenges facing every market sector are unique, the solutions will be just as individual, but the leadership approach needed to successfully face those upcoming challenges is the same.

Be bold, don’t wait for the world to overtake your current business model, be prepared for the opportunities and challenges that will be presented to every business in the upcoming years. Have vision. Look for innovative solutions, these are new issues, new opportunities, we need new ways of meeting them, and that means innovation. Be inclusive too, the challenges coming down the line, like the opportunities, could well be the biggest any sector has ever faced, it will be a team effort to be successful through this period of digital disruption, businesses that work together will be the strong ones, long term.

Good leadership is essential perhaps more than any other time right now, with so many rapid changes already here and many more to come, it is leadership that will really make the difference for businesses today.

SMEs come in all shapes and sizes of course, they operate in every market sector imaginable and offer every service and product possible, but in general, they all have something in common. The biggest asset an SME has is its staff. This does not just mean the management team, but the entire staff, in an SME they are the core of your business, because unlike large multinationals, it is difficult to carry any dead weight in smaller companies, everyone contributes to the success. With that in mind, looking at ways to improve their performance make a lot of sense.

However, knowing the best way to approach this is important, disruption in a workforce can be devastating for any SME, and here there are two approaches to take, optimisation and improvement.

Optimisation is a phrase commonly applied to processes, whether that is computer software, sales funnels or management, but it can apply to people to. In this context, optimizing personnel is all about the right people in the right positions, and keeping them there. We all know finding the perfect employee for any position is time consuming, it’s also costly. High staff turnover means lost productivity and endless recruitment, all of which impact on profitability. In this sense optimization is about ensuring that staff are happy and motivated, which usually means they are more likely to remain in their jobs.

How you do this can vary, while wellness programs that can ease issues with stress and other mental health problems, give employees motivation and keep them healthy and at work, they are not suitable for very small businesses as the cost involved can simply be overwhelming. However, good management and leadership can fulfil the same role, by being proactive with staff to motivate and encourage performance, but also to spot signs of problems early, and encourage a better sense of belonging to the group.

Personnel improvement can take many forms, and works hand-in-hand with any optimization programs, but here the focus is on helping employees advance their skills and competences. This could mean skill training, academic training and so on that help employees advance beyond their current skill levels. This has many benefits, first, investment in people builds confidence and a sense of belonging, so actually works as part of the optimisation process to retain employees, but it also allows you to reward that loyalty and dedication with improved positions. This means internal promotions, which also saves money.

it’s much cheaper to recruit internally than it is externally, and also leverages that employee loyalty as well to lower staff turnover rates. A good team is worth investing in, simply in the reduced need for recruitment and the costs and lost productivity that go with it, the return on that investment is well worthwhile. Over time with increased performance and a cohesive team it only ever increases.

Finding the right staff is one thing, keeping them, and making the most of those people is another, we all know about the first part, but just how many of us forget about the second?

Building a successful SME is a dream for so many of us today, and the journey to success, no matter how long, stressful or difficult, is most definitely a satisfying one. But how many of us think about what comes after, how we deal with long term success and the ultimate need to slow down? Our dreams may be of that successful.

l business, but it always includes us in the picture running things, we often forget that at some point, through desire or nature, that is not always going to be the case.

In fact, a recent survey suggests that less than half of New Zealand’s SME’s have thought about that very scenario, as they have made no plans for any kind of exit strategy at all. Now some may be thinking that is not such a big deal, but really it is concerning that so many ignore this aspect of business, and there are several good reasons for that.

The first is practicality, we all slow down over time, no one is immune, and at some point, every entrepreneur has to face the fact that it is time to stop. Having a complete exit strategy ready well before that point arrives is crucial if the business is to survive afterwards with new appointed principals or the sale value maximized effectively, whichever the ultimate solution is.

For many SME owners this is doubly important, as the eventual sale of the business is often seen as a retirement fund. This means that failing to plan effectively here and not obtaining the best value will hurt retirement prospects as well as devaluing the business.

Likewise, with many hoping to turn their SME into a family business, not planning the succession effectively, who takes over, how and when, and of course, ensuring they get the experience required at some point beforehand, can all lead to disaster.

Of course, sometimes, the choice to hand over the reins or even sell may be taken out of our hands. It is not something any of us like to think about, but accident or illness can strike anyone, leaving them unable to fulfil their obligations longer term. As with all aspects of business, it is simply good practice to have a plan in place.

Those are the practical reasons that a structured exit strategy should be part of any long-term planning by all SME, but there are a couple of other benefits too. The process of creating that strategy gives a very clear, objective view of the business as a whole, and can help identify areas where system changes can add efficiency and increase sustainability.

It can also help you identify the key staff in your business that can take on new responsibilities and allow you to ensure you make the most of their skills and drive. It may always seem like something to put off until later, but for all SMEs, a planned exit strategy really is worthwhile at any time.