Cashflow

Don’t be surprised by your profits. Plan to nurture and grow your earnings

Don’t be surprised by your profits. Plan to nurture and grow your earnings

It’s always a great thrill when you look at your P&L and realise that you’ve made a profit.  Let’s face it, everyone loves a profit, especially when it’s big and healthy and we don’t even mind if it’s an unexpected event.  It’s hard to think of a circumstance where the sudden arrival of a substantial profit is not welcomed with open arms.

Too often, profit is something that small business owners fervently hope for, and when it arrives, it’s greeted with gratitude, relief and yes, even surprise.  While it’s certainly a happy event, should genuine surprise always be the reaction?  If it is, that would suggest a lack of planning and more than just a smidgeon of luck!  As we all know, luck is a wonderful thing to have on your side but it is not to be relied upon to bring home the bacon month in and month out, year on year.  For that you need a plan.

Planned profit is the best profit

Understanding growth indicators and triggers is an activity in which successful owners of cash rich businesses invest a lot of time.  They understand that profit fluctuations occur for a reason – it’s not left totally to chance.  Yes, we understand that being in the right place at the right has a lot to do with success but smart business owners also believe that there is a science and an element of planning behind sustainable profit and profit growth.

As always it comes down to knowing the numbers, being able to look at your P&L sheet and understand what has occurred and why.  That’s only step one because having a firm grasp on past performance, in and of itself, may not mean that you understand what should happen next.  This is why formulating a “profit improvement plan” with your “numbers team” (CFO, accountant etc) is critical to ensuring improved cash flow.

Planning demonstrates intent by setting forth actions based on what the numbers are telling you.  Instead of simply hoping that the lucrative month you just rejoiced in is repeated in upcoming months, adopting logical steps that may call for planned operational tweaks and adjustments will help achieve that goal.

Sometimes when you win, you lose

It’s funny how one bit of good fortune, keeps you in the game – believing that there’ll be more good luck just around the corner.  However, relying on the ebb and flow of profit fluctuations and hoping to “catch lightning in a bottle” from time to time is not feasible.

The hard truth is that if you don’t work with some kind of profit improvement plan, you will always struggle.  Why? Because if you can’t rely on the achievement of a certain amount of profit or growth, you have little choice but “hustle” hard all the time.  If you don’t have a profit improvement plan, you can also forget about planned holidays – the type where you’re not sneaking back to the room to check emails and payments and the like.  Even on holiday you can never truly switch off and that, is simply not sustainable.

Truth be known everybody gets lucky – but no one stays lucky.  Especially not lucky enough to build and sustain a cash rich business.  That takes planning.