New to the business world

[pkpolymers]

Cash flows is always the issue. The key to resolve this is by increasing sales and getting paid in advance. Most businesses pinch in on profits by slashing prices and then sell on credit, failing to deliver as they eventually run out of funds to fund that growth.

 

[James_2]

Cash flows is always the issue. The key to resolve this is by increasing sales and getting paid in advance. Most businesses pinch in on profits by slashing prices and then sell on credit, failing to deliver as they eventually run out of funds to fund that growth.

This is my worry, not that the business isn't good enough it's that i completely run out of fund to be able to progress.

 

[Mr D]

This is my worry, not that the business isn't good enough it's that i completely run out of fund to be able to progress.

Sadly while some business owners take steps to reduce risk of failure, they don't take the same steps to deal with growth.
Too big a growth, too fast - not always a good thing.

And cashflow problems is a killer - you put off this bill, you decide to pay that one next month and so on - and soon in debt.

 

[Mitch3473]

As has been mentioned countless time before, you need to up your prices...this will do 2 things, give you more income for the same amount of effort and hopefully....get rid of some deadwood.
Every year we have a cull, we start by upping the price of our service. I then sit back and watch for a few months....this, so far hasn't had the desired effect other than increasing our income. Plan B is then to introduce a minimim charge....this usually works with the smaller clients...and thirdly stipulate your terms and conditions re invoice payment. Our is 7 days from date of invoice, most adhere to this. Stick to it, why should you subsidise their business at your cost. So far we have never, knowingly, lost a client due to a price increase and this year I upped it 30%.....time will tell.
We also have a holiday rental and our booking agent has added 50% on in the high season and 30% in the mid season. I honestly dont see a drop in bookings but again, time will tell.
Customers, the right ones, genrally percieve value with price, If you keep this in mind you should do alright.
Just as a footnote, increasing your prices initially isn't an easy thing...you need confidance in your product or service, confidance in the market place and most importantly, in yourself.

 

[Interestedobserver]

As has been mentioned countless time before, you need to up your prices...this will do 2 things, give you more income for the same amount of effort and hopefully....get rid of some deadwood.
Every year we have a cull, we start by upping the price of our service. I then sit back and watch for a few months....this, so far hasn't had the desired effect other than increasing our income. Plan B is then to introduce a minimim charge....this usually works with the smaller clients...and thirdly stipulate your terms and conditions re invoice payment. Our is 7 days from date of invoice, most adhere to this. Stick to it, why should you subsidise their business at your cost. So far we have never, knowingly, lost a client due to a price increase and this year I upped it 30%.....time will tell.
We also have a holiday rental and our booking agent has added 50% on in the high season and 30% in the mid season. I honestly dont see a drop in bookings but again, time will tell.
Customers, the right ones, genrally percieve value with price, If you keep this in mind you should do alright.

Where is your holiday rental?

 

[Mitch3473]

Where is your holiday rental?

Poor mans Cornwall, Pembrokeshire.

 

[Interestedobserver]

Poor mans Cornwall, Pembrokeshire.

I thought it must be UK. Think everywhere in UK is putting their prices up this summer at least. Especially Cornwall. So poor man's Cornwall must be good as well!

We are booked to stay in Falmouth in June.

Never been before but I've heard it's lovely

Have you ever used Homeexchange for your property?

I'm thinking of starting to use it.

Looks like a great way to get free accommodation all over the world. If you have a holiday home even easier?

 

[Mitch3473]

I thought it must be UK. Think everywhere in UK is putting their prices up this summer at least. Especially Cornwall. So poor man's Cornwall must be good as well!

We are booked to stay in Falmouth in June.

Never been before but I've heard it's lovely

Have you ever used Homeexchange for your property?

I'm thinking of starting to use it.

Looks like a great way to get free accommodation all over the world. If you have a holiday home even easier?

Of topic slightly but.....you'll enjoy the creeks and villages around the Helford estuary and the coastal walks of the Lizard and Lands end. Fantastic part of the UK and spent many a good day fishing off shore when I was yoof.

Briefly looked at something similar re holiday exchanges...as it is we can only use it the place in the winter as it's booked up otherwise and we are tied into the tourist industry so we cant get away in the spring, summer and autumn anyway.

 

[pentel]

I have gone for a low margin, high number game. It's a highly competitive sector, and for me it's always been a number game. There is potentially 5 million Certificates being done every year, if we had 10% of the market and made £2.50 per Certificate then it's a fantastic business. Making £25 of 1% isn't as good.

£25 off 1% is the same profit as £2.50 off 10%.. Why would you want to do 10x the amount of work for the same income?

This would give you time to perhaps ease that to £20 off 2%. The £2.50 margin customers will probably value your services less.

 

[Mitch3473]

£25 off 1% is the same profit as £2.50 off 10%.. Why would you want to do 10x the amount of work for the same income?

This would give you time to perhaps ease that to £20 off 2%. The £2.50 margin customers will probably value your services less.

Actually....the £25 for 1% would probably be more profitable, your outgoings would be less.

 

[Guy Incognito]

Congrats on the massive growth that's really impressive! I think I'm now where you were a few years ago by the sounds of it. I finished my first trading year a couple months ago so can't give you yearly sales but I know in may 2020 I had a revenue of about £1100 and in November 2020 I had a revenue of about £55k. Not quite the numbers you have but a problem to keep on top of. And I have definitely make a lot of mistakes.
I did try the invoice factoring route but it ended up being a bit of a nightmare. It may have been the company I chose to work with but it played havoc with the accounts and struggled to reconcile the bank and keep on top of what had been paid.

You're right in saying most of the costs now are for the tech and onces it's there it'll be smooth sailing (Ish) but I find that is the hardest to get and most expensive. I mentioned before my forte is property and the industry, I haven't a clue about the tech side of things. This is why is started it with my business partner who was much more web development, just turned out he wasn't what he said he was and we disagreed on alot.

I will definitely go back and take a look at my prices, it does worry me a little about the loss of customers but I do need things to change.

I really appreciate your advice on this

£1,100 to £55,000 in 6 months is incredible and far outstrips anything we did early on. I don't think we got to that figure for a month until mid-2019! I hate to use the word but "exponential" growth really started to kick in further down the line for us, a 400% year on year increase at £50k is totally different to a 400% year on year increase at £250k, let alone £1.5m etc...

The key is to try and plan a year ahead, as difficult as that may be. If you're seeing this sort of revenue, you should be able to start getting some banks interested in speaking to you and lending money, but generally they want to see filed accounts, which are minimum a few months out of date, so we have ended up using alternative lenders like ClearBanc, who simply look at your sales data and then do a merchant cash advance.

Have you considered Crowd Funding as well? We did but ultimately went down the route of trying to keep 100% of the business ourselves.

The other option is to give away some equity to a partner who can do the tech work required - would you rather have 100% of a £2m business or 75% of a £3m business? If they can help you grow then it's worth considering. It's also a benefit to have someone alongside you, doing it on your own is so much more difficult.

 

[pkpolymers]

This is my worry, not that the business isn't good enough it's that i completely run out of fund to be able to progress.

The only solution is to buy raw material on account but that's a vicious cycle. You don't get paid on time, you won't be able to pay your vendors on time. As I said earlier, best way to about would be to get paid in advance for whatever that you're selling.