Cash flow isn’t a particularly sexy side of business is it? The trouble is almost everything you do (or your clients do) impacts it. From dealing with late paying clients to struggling to negotiate a reasonable rate for a project, it all has an impact on your cash situation. But not all small business cash management mistakes can be blamed on your clients, many of these mistakes originate closer to home, with you.
Here are five common mistakes that many small business owners make that once rectified can help boost your cash flow and bottom line.
Stop Taking on Every Client
It’s very tempting, particularly in the freelance and consulting world, to take on every client that crosses your path. After all, it’s cash in the bank, right? Not always. If you have a few years under your belt, you’ll know that some clients want you for the cheapest rate they can get. Or perhaps you just took on too many projects that weren’t really in your sweet spot, just to get the money.
It’s not a sustainable model. For starters, you’re underselling yourself, and second, your enthusiasm and passion for your work will wane. One of the most important things I’ve learned in nearly a decade of business ownership, it’s that no matter how much you think you need the cash, don’t take on clients if it goes against your gut instinct.
Be more selective. By focusing your energies on clients who appreciate your work, you’ll do better and more enjoyable work, earning you more money in the long run. These tips may also help: 7 Characteristics of a Profitable Client.
Ditch Difficult Clients
In the same way that you don’t want to take on every client, ditch the ones that you simply can’t please or are more hassle than they are worth. Tell-tale signs include, not responding to email, slow to review work (delaying your ability to bill), scope creepers (those that change the parameters in the middle of a project), late payers, those that demand you go the extra mile without compensation, etc. Dump these clients and focus on those who are worth your time – you’ll save yourself heartburn and make more money in the process.
Sell on Dollars Not Value
Many new prospects will dive straight into the “what’s your rate?” discussion. But focusing on dollars alone doesn’t give you an opportunity to sell what you’re really worth and the value you bring. Value is much more than price; it encompasses everything you bring to that client – years of experience, focused expertise, a proven portfolio, reliability, follow-through, and so on.
For tips on selling your value, not your rate, check out these blogs:
- How to Start Selling on Value Instead of Price
- How to Avoid the Common Trap of Underpricing Your Freelance Services
Don’t Forget About Your Former Clients
When you hit a dry spell, it’s easy to think that now’s the time to start finding new clients, in truth your former clients can be your most lucrative source of income, they just need a little reminder that you’re out there! In fact, one of my most profitable clients is one that disappeared off the radar after a spate of jobs, but after reaching out to them during a quiet period, they started sending work my way again. A trickle at first, but that soon turned into a steady and consistent flow.
Building relationships isn’t easy, so why not reach out to those that you’ve already built, assuming nothing went sour. It takes little more than an email or phone call, but the payoff could be worth it.
Forget the Old Saying that a Client is Always Right
Sometimes a client doesn’t know what they don’t know. It’s an important point to remember – they hired you and your business to help them achieve their goals. If they quash every idea or word of advice that you provide, why even have the relationship? You were hired to help them succeed, not be a “yes” person. If this is the case, it does your reputation no good and makes for a less than fruitful relationship. It might be time to move on and find a client that values your expertise.
The Bottom Line
Taken alone these complaints may not sound like a big deal, but they can quickly chip away at your time, happiness, and your bottom line. They are also the kind of mistakes that you don’t appreciate until you’ve experienced them. The good news is that with time you do start to recognize the signs, giving you ample time to fix things (or walk away) before the situation starts to compromise you cash situation.