Does Your Business Need A Root Canal?
It starts with a simple cleaning and ends with needing a root canal. The day before your dentist visit everything was fine. Why, suddenly, do you need a root canal? No way—the dentist is just trying to make a buck, you tell yourself. You pass on the root canal and the over-eager, money-hungry dentist.
It starts with a customer who orders frequently and pays bills on time. Your business just had its best month ever, so you hire a new salesperson to support continued growth. Your accountant congratulates you on such a great month but warns that you need cash. You can’t need cash, you think to yourself, you just had your best month ever. Your accountant explains that you have exceeded your credit limit with your suppliers due to the uptick in sales. You need the cash to meet payroll and pay suppliers to get the orders produced. You hang up on your accountant after telling her you will use your credit cards.
Two weeks later you stop at In & Out Burger and order a Double Double Animal Style, a large fry and a vanilla shake to celebrate your successes. The burger is great and so are the fries. But as you take a sip of the shake you feel extreme pain in your tooth. You pause; the pain retreats a bit and you take another sip—a little more carefully this time. The pain roars back with a vengeance. You throw out the shake and head home to call the dentist.
Meanwhile, your accountant calls to say you are over-extended again and your credit cards are maxed out. You ask how that’s possible since you had such great sales last month—the cash should be rolling in. Your accountant explains that several clients are slow payers and unless you can get more cash immediately you won’t meet payroll this week—let alone pay for the root canal and you know your dentist wants cash up front.
Good news—a few clients pay their bills, generating enough cash to get through the week, process more orders and be able to afford the root canal. But you put if off since you need to keep funding your company’s growth.
A few days later, you learn your best customer is not returning calls and his account is overdue. Just a few weeks ago you were on top of the world and your business was booming. What happened? You let your new salesperson go and call your best customer, but the calls aren’t returned. Your tooth hurts so bad you can’t stand it, so you borrow money from your sister and schedule the root canal.
Your tooth is now abscessed, and you must take antibiotics before the procedure can be performed. You can’t believe your bad luck; you start taking the meds. Then, your accountant says your best client has filed for bankruptcy and your invoices won’t get paid. In hindsight, you and your accountant should have been watching the account and seen that coming. Thankfully, your bank gives you a loan and your vendors work with you to get through the situation.
Two weeks later you finally have the root canal. You feel better and wonder why you didn’t listen to the dentist the first time. Your accountant reports clients are paying their invoices and the money owed is starting to catch up. Your business isn’t in great shape yet, but the worst is behind you. It will take months if not years to recover but you will survive, and you are thankful.
You take a moment to reflect on what happened. In looking back, you realize you should have foreseen the financial problems or at least been prepared for the possibility. You should have been paying more attention to your receivables because you could have taken out a loan or larger line of credit when things were great (banks never want to loan money when we really need it). You promise yourself that you will look forward (strategic foresight) more frequently to ensure the long-term viability of your business (and your teeth).
You reflect again on the reality that sometimes no matter how hard you try bad things will happen. You realize that when they do, you must address them quickly or they will get worse.
Our industry is healthy and will continue to support growth for businesses that recognize the signs that indicate a needed change. Whether your issue is cash, technology, people or something else, it is important to deal with the issues early. For example, tariffs and product safety are two relatively near-term challenges your business must be prepared to handle. Don’t wait. Address these and any other issues now to lessen your pain and ensure your business’ success.
Dale Denham, MAS+ is the PPAI Chair Of The Board