Business owners everywhere know: cash is king. For small businesses cash can also mean the difference between success and failure, and the struggle is real. According to a study by U.S. Bank, 82% of small businesses fail due to poor cash flow management.
When cash shortages arise, it can be difficult for home service businesses (such as cleaning, pool, home repair, landscapers, and other contractors) to keep up with operating expenses, buy equipment and supplies, repair vehicles, and market to new customers.
There are several reasons why home service businesses are particularly susceptible to cash flow problems:
- Customers often don’t pay on time. 64% of small businesses regularly deal with late-paying clients.
- Projects usually require upfront investment, causing a gap between cost and revenue.
- Unpredictable expenses, such as equipment replacement or repairs, an accident on the job, and more are common.
- Seasonality and unexpected weather events affect home services business often.
- Competition is extremely stiff.
The best way to mitigate cash flow gaps is to be aware and prepared. On Alignable today, we some observations about what the most successful home service businesses are doing differently.
In our article, we present a guide to 3 concrete actions that the best home services businesses are taking to mitigate and prevent cash flow problems. We talk about:
- Getting paid on time
- Setting up your business financing before you need it
- How to get a deep understanding of your cash flow
We break each of these steps down and tell you how. These three steps can take a lot of the guesswork out of cash flow management, and help you stay in the black, even through those inevitable rough patches.
How have you been staying on top of your business cash flow? Do you already use cash flow statements and cash flow forecasting to plan ahead? Have you found other ways to gauge your business performance?