Cynthia started her successful business twenty-five years ago with nothing more than talent, a belly full of education and a $10,000 limit on her Visa card. Things were going well and she was even considering retirement in five years. Then Covid-19 struck and wiped out half her business. But someone had a plan…
Cash Flow Problems.
Six years ago, Cynthia had a problem. Her business was generating nearly $50,000 per month in revenue but she had just $1,000 in the business checking account. She found herself continually putting money into her company to keep it afloat, instead of enjoying the fruits of her labor. She planned to retire in ten years and knew she was going in the wrong direction.
So, Cynthia decided to call her financial advisor and ask for help. Luckily for her, not only could he help, but one of his specialties was in exactly these sorts of business issues. After listening for just a few minutes, Cynthia learned that she either had an embezzler or an accounts receivable problem. She had no idea how to fix either, but her financial advisor did. It turned out that nobody was stealing money. But neither was anybody collecting overdue accounts. Cynthia had more than $200,000 outstanding from clients but did not have a system to collect the money.
Over the next six months, her advisor helped her build an accounts receivable system from scratch. He brought in highly experienced firms in technology, accounting, and collection. Additionally, her advisor not only identified nearly a dozen other issues that could thwart Cynthia’s business success, but also suggested the specific type of advisors to handle the legal, insurance, tax, retirement planning, banking, debt, savings, and cash flow management systems. These improvements brought Cynthia out of the small business dark ages, into clear profitability, and she quickly began to stockpile large cash reserves. Given the nature of her business, her financial advisor instructed her to keep a stockpile of enough liquid assets to withstand at least 50% decline of business.
While no one could have predicted COVID-19, Cynthia watched businesses go bankrupt all around her, yet she sat on a fat pile of cash. As the vaccine rollout began, Cynthia saw her revenue not only begin to return to normal, but she also began to gain significant market share from her bankrupt competitors. At a recent meeting with her financial advisor, the conversation quickly turned to becoming a semi-retiree…