Have you ever had a totally broke business owner come to you begging for help? How can you solve business coaching clients’ cash flow problems?
This happened to us at Advantage Business Coach a few months ago. We had a desperate business owner come to us who had no cash flow, was in debt up to his eyeballs, and was about 60 days from having to close his doors.
Our business owner (we’ll call him Joe) wanted to save his business (we’ll call it Joe’s Shop of Everything because he didn’t know how to do anything else with his life!).
Even though he could hardly pay us, we rolled the dice with Joe, and ran a Benchmark Boss Comprehensive Analysis to see where the issues were.
Joe’s obvious issue was his lack of cash. Joe was in a negative balance in his bank accounts about every three days. But the underlying problems were a mystery to him.
Solving Business Coaching Clients’ Cash Flow Problems
So how do you get cash into a business that is burning through it faster than they can make it?
Of the six Cash Gap Plan Strategies–longer terms with vendors, shorter terms with customers, fast collection system, bonus accounts receivable staff, outsourcing accounts receivable, and reducing inventory–we decided to focus on Outsourcing Accounts Receivable because his ratios showed this would be the most effective.
Joe knew of a factoring company near him that would only charge a 5% fee for their service. Great for a company that needs cash. Here’s how it works:
- Joe sells his Accounts Receivable to the factoring company
- The factoring company pays Joe 80% of the total Accounts Receivable
- The factoring company keeps 5% of the Accounts Receivable for collection fee
- Once factoring company collects the Accounts Receivable from Joe’s customer, the remaining 15% is put into a reserve account to be paid to Joe twice a month.
After only three weeks of working with us, Joe was able to sell his Accounts Receivables and walk out with a check for $9,000. In the following 90 days, the factoring company paid Joe another $2,000 after they collected on the debts Joe had sold them. Joe kept doing this, basically outsourcing his AR so he could focus on higher value activity than collections.
Over the last three months, Joe has begun factoring his receivables one to two times per week. This created a consistent cash flow.
In the month of May, Joe had $6,000 left in his bank account and all of his bills were paid. Ending the month with money in the bank was a first for Joe.
Want to hear more about Joe’s Shop of Everything and learn more about how we used the Cash Gap Plan to save Joe’s business? Check out our free 30 minute video training HERE.
Advantage Business Coach was founded by Bill Green. Bill is a Certified Fraud Examiner and Forensic Auditor. In his career working with Fortune 500 companies, he hunted down more than $7 million in accounting fraud. After his career in big business, Bill leveraged his skills and entered the business and executive coaching industry.