Reviving a cash-strapped business

Yaneek Page, Contributor

QUESTION: I have been in ceramics manufacturing for over 10 years. I started my business out of pocket, and to be honest, things have not been easy. Working out of pocket was slow, but at least I could realise savings and it was not really stressful. I wanted to renovate my location and acquire a motor vehicle, to improve profitability, so I accessed a loan from my credit union.

From I entered the cycle of borrowing, running my business has got more difficult. My business has the potential to generate a sizeable amount of money but it is not as predictable as I would like, and due to the stringent repayment, terms, the money goes into paying the loan and late fees.

I have some good prospects, for example, an offer from a hardware chain to supply them with ceramics and my old customers who are still loyal to my product. To move ahead, I need significant capital injection, preferably outside of the usual financial arena - banks, credit unions, and micro lenders - as I think their terms aren't designed to help you grow. I prefer funding through a private/angel investor. I would love to hear your thoughts on my situation.

- DJ

BUSINESSWISE: I'm truly happy to receive your query because I can offer some advice that can transform your business while highlighting a fundamental problem for small businesses: effective cash flow management.

Let me commend you on the calibre of your ceramics, in particular the beautiful, high-end finishes which I was able to view via the Web links you sent. Since you requested anonymity, I am not able to share them here. Suffice it to say, quality is one of your strengths.

While you are convinced that your biggest problem is access to funding, I don't agree.

I was struck by the statement that your business has the potential to generate a sizeable amount of money but it is not as predictable as you would like, causing you to constantly make late payments on your existing loan.

This suggests that cash flow management and establishing reliable and predictable revenue sources to allow for proper financial planning, business operation, and growth are your biggest challenges.

I'm not aware of any private investors who could bail you out of your predicament now, but in any event, that would not help as no injection of capital, from angel investors or grantees, can realistically sustain a business which lacks reliable revenue sources.

You've probably heard the saying 'cash is king'. It can't be exaggerated. Cash is to business what oxygen is to humans. It will die without it.

Your business will never survive much less grow if you aren't managing cash flows. You should prepare cash flow projections for a year, which are the estimated inflows and outflows of cash that will go through your bank account every month. This allows you to manage financial targets and foresee revenue shortfalls so you can plan accordingly.

You can do this with an Excel spreadsheet. If you need guidance, contact a business adviser at the Jamaica Business Development Corporation at www.jbdc.net.

Your other major issue - establishing reliable/predictable sources of revenue - will require aggressive new strategies, including reviewing your product positioning. Your products are handmade with quality materials and amazing high-end finishes. They don't belong in hardware stores.

Reposition the products and approach mid- to upper-end retail furniture and home accessory stores with samples and offer attractive wholesale prices so they can make reasonable profits.

You can also sell directly to customers on a wider scale than word of mouth by creating accounts for your business on Facebook, Instagram, and Pinterest. These platforms are free and provide low-cost, targeted advertising.

Pinterest has about 70 million users and is excellent for showcasing products like yours. Best of all, its users are more than twice as likely to make a purchase than Facebook, and spend more than double, on average.

Another strategy is exporting. You can start on a small scale by selling on Etsy.com, which is regarded as the world's most vibrant handmade marketplace. For the medium term, contact the Jamaica Manufacturers' Association and the Jamaica Exporters' Association for guidance with product development, packaging, market identification, and export logistics, and other such areas.

I recommend diversifying your product offerings to provide ceramic jewellery, eclectic gift items and keepsakes, which are in demand, lighter in weight, cheaper to ship, and less prone to breakage.

You could also launch an online training product to generate additional revenues. This would involve creating a course or series on how to make ceramic products, for example 'How to Create a Ceramic Heirloom'.

The good news is that you can do this for as little as US$150 or less. The website https://www.udemy.com/teach is a great resource to help you get started.

One love!

Yaneek Page is a trainer in entrepreneurship and workforce innovation. Email: yaneek.page@gmail.com Twitter: @yaneekpagewww.theinnovatorsbootcamp.com