This makes me sick in the stomach.
Just look at what the ASIC data is telling us…
4,210 total failures in a single year…
(nearly double the next highest industry)
That’s 12 trade businesses going under every single day.
This is what the CDC would call 'a nation-wide epidemic'.
I can’t believe this isn’t headlining the news right now…
A jab, a face mask, and a border closure won’t fix this one…
Because this isn’t some airborne disease or virus…
It involves something much more contagious…
‘Beliefs’.
And these little suckers are sticky.
Once a trade business owner believes something…
It’s hard to change their mind.
(even if that belief is detrimental to their business)
And one of the WORST beliefs that I’ve ever come across is…
More work = more money = better cash flow
It sounds intuitive…
It sounds like it makes sense…
But just not true.
And it’s murdering trade businesses nation-wide…
But I’ll come back to this in a second.
Because I want to let you in on a little secret…
Are you ready?
Growth EATS cash.
With more work comes more costs.
And when costs go out BEFORE cash comes in…
(typically the very nature of the construction industry)
Growing trade businesses end up in a situation where that cost going out, starts to outpace the rate that cash comes in…
Which is bad news for cash flow.
Below is an example of this:
Revenue is up… profit is up…
All the key profit and loss metrics are looking good…
But cash is now going out the door faster than ever… debt is piling up… and the bank account’s looking more barren than the Sahara desert…
So, what do most do?
They keep trying to win more work.
Because more work = more money = better cash flow.
But little do they know… their balance sheet is a mess… their working capital is sky high… and their cash flow is being flushed down the drain…
(and sales isn’t fixing the issue!!!)
That’s why this belief is DANGEROUS…
300kph down Conrod Straight with a blindfold on dangerous.
So, it’s time to change it…
Instead consider this:
More work = growth = strain on cash flow
In my experience, growth makes a bad cash flow situation 10 times worse.
So, don’t look to growth as your saviour…
Cash flow is a 4 chapter story.
To improve it, you need to master 4 areas:
If you aren’t producing strong profits, or you’re poorly managing working capital or other capital, then your business is likely going to struggle with cash flow.
It’s that simple.
I’ve broken this all down into absolute detail in my latest report…
So, don’t become another ASIC statistic and download my free report now.
If you want one-on-one help tackling this problem in your business, then make sure you reach out to our team here.
