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Good News: You Can Survive a Temporary Cash Crunch
Bad news: you've been hit with a surprisingly high tax bill this year. Good news: That means profits were higher than expected!

More bad news: The cash drain after paying the taxman may have triggered a cash crunch. More good news: Several mechanisms exist for surviving this temporary crunch.

In this scenario, the solution starts with a well-crafted cash flow projection. The forecast quantifies the impact of your survival measures.

Predict how new initiatives alter your cash flow: Making cuts in operating expenses is the first tool in the entrepreneur's kit. But don't engage in a broad slash-and-burn strategy. Make prudent reductions that don't cripple ongoing sales and service. A key area for saving precious cash is delaying capital expenditures, such as new equipment or upgrades to existing machinery.

Evaluate accounts receivable and inventory: When money conditions are tight, this step is vital. Needed cash can be generated by offering discounts to customers for paying early or by selling excess inventory at reduced prices.

Make sure these are limited-time offers rather than permanent changes to your business policy. And convey the message that you're offering rewards to customers, not that you're experiencing cash flow difficulties.

Examine the liability side of operations: Look into restructuring debt with lower monthly payments. Ask for concessions - such as extended payment terms - from vendors. Communicating frankly with creditors is the best way to show that you value the continuing relationship and want to assure them that they will be paid. This is the good news they want to hear.

Predictive Analytics: This Century's Crystal Ball
It's getting easier for small and medium-size enterprises (SMEs) to use predictive analytics (PA) to make informed decisions in areas such as marketing, sales, supply chain optimization, and more. Increasingly, organizations of all sizes are using sophisticated statistical approaches to forecast future trends and behaviors from historical data. It helps to have a crystal ball these days.

While use patterns have long been employed to forecast future demand, technology has made data analytics faster, less costly, and more accessible. As a result, many smaller businesses are now using it to identify growth areas and to market certain products or services to easily identifiable target groups via special offers or other tightly focused approaches.

PA models can help retailers fine-tune consumer messaging; in sales, it can put you ahead of the pack. Real estate agents, for example, can focus marketing dollars on targeting individuals most likely to be interested in certain listings, as well as price forecasting for a specific property. Agents also can pinpoint homeowners who are most likely to sell their homes - and therefore might welcome an approach. It's a long way from a cold call.

That said, PA is most valuable when predicting group behavior. It's not so much about the individual customer as it is about identifying behavior patterns of an entire customer segment and using that information to inform business strategy. For instance, if historical data indicates a customer segment is highly likely to move to a competitor, you can respond with a special retention offer. Quickly, directly, easily. And very likely successfully!

Local Social Media Gurus Can Influence Your Customers
Word of mouth has been the best way to market almost since the beginning of time. Until recently, when it came to large purchases such as cars or homes, we'd ask family and friends for their advice. And they'd influence our buying decisions.

But in today's digital age, there are new advisors. They're called influencers, and they're primarily celebrities who use social media platforms to encourage their followers to act, style, eat, and buy as they do.

Social media influencers have followers that often number in the millions. In June 2017, for example, singer Selena Gomez had 123 million followers on Instagram alone. And they're incredibly powerful. As Kimberly de Silva points out in a recent Entrepreneur article, 49% of buyers rely on social media influencers for advice.

Now, says de Silva, small- and medium-size enterprises (SMEs) have the opportunity to use this desirable approach, thanks to micro-influencer marketing. As she suggests: "[An SME can now] partner with influencers with smaller followings to promote your local business with authentic posts of sponsored ads."

Although micro-influencers reach smaller numbers, their fans are more tuned in and more apt to listen. What's more, micro-influencers appear to be more influential in local markets. They become the trusted advisors, the voice of authority in a given area or community - precisely what small businesses need.

It can take some serious research to find the right micro-influencers; the ideal candidate is an individual who precisely aligns with your brand and message. Plus you'll want to partner with those who already share interests with your target audience on platforms they both use.

De Silva notes: "The better the fit, the more effective the influencer marketing campaign."

Small Businesses Need Risk Assessments, Too
Mitigating small-business risks essentially entails making judgments founded on the best information. Because guaranteed security is never possible for an entrepreneur, effective management of risk should be your most important goal. Therefore, you will need to adopt a system that delivers the information necessary to drive sound actions that will minimize your risk.

Informed decisions are required at small enterprises as well as in large organizations. Even though you're a one-person operation, you can still create a basic risk assessment system. Some risks are intangible, such as harm to reputation or brand. But many can be measured quantitatively. Risk management planning focuses on avoiding the tangible risks that can imperil the functioning of your business.

Types of risk

Determining whether your financial house is built on sand or rock begins by considering the types of risks your business is exposed to.

Topping the list of risk variables to consider is your company's current financial situation. Have a system for maintaining contemporaneous financial data that you compare to targeted projections. Know your trends for sales and profit margins, and identify the causes of fluctuations to determine if there are any red flags that could potentially trigger a business crisis.

When taking on an expansion or a new opportunity, always determine the expected risks relative to the rewards. Growth requires capital, which often means taking on debt. Compare the borrowing costs - in addition to the increased expenditures for growth initiatives - to anticipated future benefits.

What can't be controlled are external risks, such as market conditions and industry trends. If a quantitative financial assessment reveals adverse results, the culprits could be these external risks. Although they're beyond your control, you can still position your business for the new conditions with revised cash flow projections.

Conducting a risk assessment

Reduce the complexity of risk assessment planning by considering some basic questions. Begin by determining the direct as well as indirect risks imposed by a new project, new customer, new product, or new strategy. Next, consider the possible adverse consequences and how serious these consequences could be; know the extent of your worst-case scenario. Only you can decide what amount of risk is right for your business.

After assessing potential consequences and the financial effect they would have on your business, develop countermeasures to protect your vulnerable spots. The main element of a risk assessment plan is what to do when any potential threat morphs into a problem that could seriously impact your business. Ensure that you have action plans ready for each risk, should it become a reality.

Solid financial data is critical to risk oversight

Finally, risk management hinges on knowing in advance when one of these potential threats is about to become a danger. In risk oversight, it's accurate, up-to-date financial data that will give you this heads-up. There's no substitute for reliable real-time financial statements and your ability to interpret them. In doing so, you can be vigilant in evaluating risks so that your business thrives rather than topples.
Michele Ball
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Marketing Trends
What marketing methods will keep your small- or medium-size enterprise (SME) at the forefront of your industry? Which tactics are a waste of resources? The following links shed light on the latest trends in tech and analytics to help you make the most of your marketing efforts:

Should you focus on Facebook, Instagram, or LinkedIn? Discover the most important insights from the 2017 SME social media report:
4 Insights from the SME 2017 Social Media Marketing Report

In today's digital marketplace, you can't afford to miss out on "the mobile moment." Try these five techniques to make the most of smart technology:
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Need something to keep it all straight? Here's your checklist:
Checklist of Essential Small Business Technology in 2017

From collaboration tools to crowdfunding to videos, these top 10 trends will drive your business toward success:
Top 10 Business Trends That Will Drive Success In 2017
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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