Keep an eye on your cash
Ahmed Ali
Ahmed runs a 12 year old digital printing business. He found himself in a critical situation which was a result of a couple of poorly judged cash decisions. Ahmed knew that it was time to get an external perspective and during his quest for a strong mentor he was introduced to Dare To Scale.
“It was one of the darkest periods of my life and when in that stage, nothing makes sense. I am not someone who asks for help much less look for a mentor or a coach. A friend recommended I get some guidance and today I am glad I took his advice and had that introduction call with you guys. Tough as the rest of the months were, I really appreciate your patience and strength to help me see the light at the end of the tunnel”.
~ Ahmed Ali
Many small unaddressed
problems quickly become a
major scaling up hurdle
It is small businesses that need our help the most. The founders of these businesses show the courage in starting a business and they show even greater courage in wanting to get out of a situation so of course, Dare To Scale took Ahmed on as a mentee.
Ahmed had started this business with a Partner and together they made a few major yet impulsive cash decisions which left the business in an asset rich but cash poor position. Ahmed’s Partner later exited the business. Ahmed, armed with the immense belief and a strong purpose to look after his Team took on the challenge to turn the situation around.
The situation was that most of the money was invested in the inventory and machinery required to run the printing unit. In addition, invoicing and cash collection was very slow affecting his ability to continue to run the business, meet payroll and other expenses. He now had to dig into his savings for about $125,000 and then he had to take out a second mortgage of almost the same amount to meet the shortfall.
Ahmed was too close to the problem and could not see his way out because, like a lot of business owners we come across, he is very good at what he does, a technical master of running his printing unit. What he was not prepared for was to really run this as a business in its entirety especially in this tough financial situation. He wasn’t willing to see the reality of how deep his situation was. It was something that he wanted to know and yet absolutely did not want to know for the fear of not knowing how to handle it.
A JOURNEY OF A THOUSAND MILES
STARTS WITH THE FIRST STEP.
A step, which Ahmed had the courage and determination, to take. The first step was indeed in accepting the situation and then resolving to find a solution.
We began working together to first strengthen him emotionally to for the journey of recovery. The next 18 months with Ahmed were intense to say the least.
Among a whole host of others, the one framework we worked on consistently and in-depth while stripping away every layer in the department was the very simple, yet rarely used in its entirety, Cash Conversion Cycle. While simple to understand, the Cash Conversion Cycle framework really is about tracking and subsequently lowering the time it takes for your Dollar invested in the business to work its way through all the cycles and return to your bank account as cash received.
Which meant going through every aspect of Ahmed’s business to see where cash is ‘stuck’, discover possible ‘leaky taps’ and then revamping the functioning of the Finance department. While there are several ways to tighten that entire cycle, the three main areas which we worked on with Ahmed were:
- Shorten the billing and the payment cycle.
- Tighten the business model for ensuring a profitable pricing structure was in place.
- Build and refine the processes in the business especially in the Finance department. Whilst the business was digital printing, it was still fairly analogue in its processes. The administrative process in the business was also not identified leading to manually raising an invoice and perhaps not actually sending it out on time. In those days payments were still accepted through cheques, so perhaps not actually depositing the cheque in the account on time. You can see how these delays added to the length of the business’s Cash Conversion Cycle. So, the solution required really was bringing together very strong and efficient processes.
Result of unveiling a tightened and healthier payment process.
It took 18 months of hard work and an additional 2 years for the business to turn around and repay Ahmed for the cash injection he had made. What a big win it was not only for Ahmed but for his entire Team who stood strongly by him through this time. Kudos to them and certainly to Ahmed for first of all having the courage to say “I am going to make this change happen”, and taking that first step because that is where everything starts!
Today, we are delighted to report that he continues to be a DTS mentee and runs his unit better than ever!