As I promised on Monday, here are a few ways to avoid running a cash poor business. Although, truly, it can be boiled down quite simply: Try never to spend money on a job that is not yet yours. Even after you’ve been hired, try never to install the job until you’ve been paid in full. Otherwise, you’ll likely have to use your own funds, which is a quick way to end up cash poor.
OK, I’ve delayed it long enough. It’s confession time… I’m often guilty of doing this. Fortunately, I have a wonderful CFO, who has forbidden me from talking money with clients. She also won’t let me lift a finger until the client’s check has cleared.
When I meet potential clients, I get so jazzed about designing their wedding or event that I immediately start creating story boards and coming up with ideas, forgetting that I haven’t technically been hired yet. It’s a fine line, because potential clients want you to be excited about their job, and they love nothing more than when you jump right in with ideas. However, cost is usually never far from their minds, and they want to know exactly what they will be getting for their money.
You must always keep in mind the three key things you’re selling to potential clients:
1. Your time. Time is money. Yes, folks, our time is our most valuable commodity.
2. Your Ideas. I feel sort of sheepish admitting this, but when I’m with my client, I always hear Lady Gaga’s “Poker face” in my head. As much as I want to get clients excited about what I can do for them, my ideas are my product. I know that I can’t give all of my ideas away in the very first meeting before they’ve made it clear they want to give me the job. Some potential clients expect personal design ideas right there in the first meeting, but the danger of this is that they could take that idea and hire someone else to do it.
3. Your Materials. If you give a presentation to potential clients, you will be using your own cash to do so. Therefore, if a client insists on seeing any flowers or other design elements before hiring you, make sure you charge them for it.
Getting new clients to hire you isn’t easy. It’s all about how you sell, and it’s perfectly acceptable to create a budget for how much you’re willing to spend on wooing clients. If you want to risk time and money by designing a job you may not get, just make sure you can afford to do so. Because if you can’t, your could seriously hurt your cash flow.
Now a few questions for you: Have you determined your hourly rate? Have you updated it in the last three years? You can’t price a job accurately unless you charge for your time. So, what’s you worth?
Tomorrow, I’ll share my top suggestions for avoiding cash flow problems.