The Hidden Cost of Being a Business Owner... and 3 Ways to Alleviate the Cashflow Rollercoaster

We all know the stories of entrepreneurs that have hit it big…

The mega-yacht. The private jet. Multiple homes in exotic locales.

Running a business sounds like a superb concept… and it is, BUT…

Does managing your business sometimes feel like stumbling through a dark house without a flashlight?

As entrepreneurs, we’ve all been in a situation where there was a near-term need for revenue but idea how we were going to get it.

It could be you’ve got a tax bill due…

Or you’ve got business partners to pay…

Or worse, you need to make payroll and your loyal employees have no idea their mortgage money may not hit their accounts on time.

Deadlines looming, sleepless nights and you’ve got no immediate solution.

It’s a terrible feeling and it happens to almost all business owners at some point.

The good news is, it doesn’t have to be that way. There are tangible solutions to not only ease the burden of cash flow stress…

But start each month with enough “guaranteed” revenue to pay the bills.

Here are 3 that can potentially help every business owner

1. Diversification

Whether you’re investing or building a business, one of the worst things you can do is go all-in on one product or revenue stream.

Even two sources of revenue probably isn’t enough, for a few reasons.

First, if either of your primary sources of revenue go away or diminish significantly, your entire business is at risk.

And second, happy customers often spend more money. If you have an entire suite of products, you not only have a number of ways to attract new customers, but you also have extra ways to monetize each and every customer.

Consider Apple — even as iPhone and computer sales began to lag, they’ve been significantly increasing revenue on the services segment of their business.

Action: If this is you, take time today to evaluate your product offerings and begin to focus on ways to build multiple streams of revenue. It could be complementary products, subsets of products at a lower price point, coaching or services to support the customer, and much more.

2. Recurring Revenue

One of the worst places to be as a business owner is starting over every month at zero.

Your business plan says you have to hit a target number every month to pay the bills, the team, partners and every other monthly expense.

And the marketing team has designed a kick-butt promotional calendar to hit those goals.

But what if a campaign misses?

Or… what if they all do?

Do yourself and your business a favor and make sure you have something that can generate recurring revenue in your products and services portfolio.

It could be 10% of monthly revenue or 50% — just make sure there’s something on the balance sheet at the beginning of every month.

Action: If you don’t have any recurring revenue yet, review your product portfolio and figure out where you can add some in. And if you do have some but it’s not enough, then consider the ways you can increase your monthly starting point.

3.      Understand what it costs to acquire a customer and what their lifetime value is. While you might not be aware of it, some customers are too costly to acquire. Action: Consider pursuing the following process | Gather Customer Data -->Calculate Acquisition Costs --> Assess Lifetime Value -->Compare Costs and Value --> Make Data-Driven Decisions --> Implement Changes and Monitor Results

3. LTV, not just AOV

With increasing ad costs and competition online, a lot of marketers are laser-focused on their cost to acquire a customer and the average order value (AOV).

While these are two critical numbers for your business, you may not realize that focusing so heavily on them could actually LOSE your business money.

You see, some customers are too costly to acquire.

The combination of digital marketing and direct response copy often leads businesses to focus too much on conversion and conversion rate optimization.

More customers is the goal, right?

Not necessarily. If you’re marketing is brining in too many low-quality customers, you could quickly find yourself spending 5 to 6 figures without a positive ROI.

If you’re looking to both scale and create a stable, long-term business with high profit margins, your focus needs to be on lifetime value (LTV) far more than on AOV.

Action: Pursue the following process:

Gather Customer Data —> Calculate Acquisition Costs —> Assess Lifetime Value —> Compare Costs and Value —> Make Data-Driven Decisions —> Implement Changes and Monitor Results