Dr. Thomas O’Grady is a business expert with a Ph.D. who has also cracked the Soviet code three times. He is the author of the book, The Mechanics of Breakthrough Success and the podcast, Life Unsettled. I spoke with Dr. O’Grady recently, and he gave me some very valuable tips to share with Smart Hustle readers. Today I’d like to share his thoughts on boosting profitability and increasing cash flow.
That is the bottom line for every business – how can you increase your profits? Dr. O’Grady gives us three very important things to keep in mind:
1. Keep Your Eye on Your Financial Management
Financial mismanagement accounts for the failure of 70 percent of all companies. Sometimes it’s easy to get caught up in other processes such as product development or marketing, but it’s important to keep a close eye on your finances. This should be your top priority.
2. Is What You're Buying Suitable for Your Company?
Some business owners are mesmerized by getting the “latest greatest thing” on the market, but ask yourself if you really need it. It might be better to stay simple for a while.
3. Remember That You Can Make Too Much Profit
This might sound like an oxymoron - it’s like being too healthy. Is that even possible? But Dr. O’Grady points out that if your business grows too fast, it might not actually be advantageous. This is called the “Growth Syndrome.” Keep an eye on your cash flow so that doesn’t happen to you.
How Small Business Owners Can Increase Cash Flow
When small companies are dealing with large companies as their customers, this can have a negative effect on their cash flow. For example, let’s say that you have a big contract for $25,000 with a big company. You want to get paid on time to keep the cash flow moving, but they may have a policy that says they pay out invoices only every four months. This obviously presents a problem for the small business owner who is waiting on the payment.
Here is what Dr. O’Grady says you can do to help this dilemma:
- Make sure your original agreement is written well and has exact instructions for payments and due dates. Include some penalties for late payment.
- Keep in touch with the bigger companies and build a relationship with them. Let them know that your employees are waiting on their paychecks and maybe they’ll be more timely that way.
- You may have to slow down growth a bit, even though it sounds like a difficult thing to do.
- Get other funding such as a line of credit, but be careful that you don’t get addicted because it could send you into debt.
Dr. O’Grady’s final tip for small business owners is to have a plan. Don’t take action before you know where you’re going. And finally, don’t believe anyone who tells you that you can reach a 6-7 figure profitability level in a short amount of time. Building a successful business is a process, and it takes time. So be patient and enjoy the journey.