This article is an excerpt from the Shortform book guide to "Built to Sell" by John Warrillow. Shortform has the world's best summaries and analyses of books you should be reading.
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What is a positive cash flow? How do you create cash flow?
Positive cash flow means your business is bringing in more money than it’s spending. According to John Warrillow’s book Built to Sell, generating positive cash flow is the key to creating sustainable growth that will make your business easier to sell.
Here’s how to create cash flow for your small business.
Generating Positive Cash Flow
To learn how to create positive cash flow, Warrillow recommends charging up front for your product or service. This way, you’re receiving the money for the service before you pay for its costs. A subscription model is a great way to generate positive cash flow, as you take in a monthly or yearly fee before you provide the service. If you’re unable to charge for subscriptions, try to get at least some of the money up front.
(Shortform note: There are many ways you can improve your company’s cash flow. To facilitate the up-front money Warrillow recommends, consider offering discounts for early payment or sending out invoices as soon as they’re generated. If you can’t charge for subscriptions, you can also improve cash flow by doing credit checks for customers to ensure they’ll make timely payments moving forward.).)
Hiring the Right Salespeople
Now that you have cash on hand and a service you can provide without being personally involved, Warrillow recommends hiring a sales team. With a sales team, you can remove yourself from the process of selling the service or product.
According to Warrillow, you want salespeople with experience in selling products, not services. Even if your company provides a service, a salesperson who can sell products has experience selling a specific, unchangeable item. Because of this, they’ll know how to sell a customer the exact specialized service you provide. On the other hand, a salesperson who’s used to selling services will want to modify your product or service to cater to each customer’s needs and desires. This will make it more difficult to build a consistent, scalable business model.
If possible, Warrillow also recommends hiring at least two salespeople. This is because salespeople usually thrive on competition. Multiple salespeople will also prove to potential buyers that your company is successful because of its product or service, not because of one talented salesperson.
More Tips On Building a Sales Team to Create Cash Flow
In Sales Management. Simplified, Mike Weinberg also advises that you hire more than one salesperson but recommends that you do so in order to have different people for different roles within the sales department: finding leads, retaining customers, and helping customers. Having separate roles for finding new customers and retaining existing ones is especially important because of the different skills these jobs require.
Weinberg says one of the most important aspects of sales is a strong sales pitch, which can be used to sell your specific product or service without changing it for each new customer—which will help you sell your exact, unmodified product or service as Warrillow recommends. A sales pitch should be a short, simple narrative that conveys how your product or service will be valuable to the customer.
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Like what you just read? Read the rest of the world's best book summary and analysis of John Warrillow's "Built to Sell" at Shortform.
Here's what you'll find in our full Built to Sell summary:
- A step-by-step process for building a business you can sell
- Why you should build a sellable business even if you don't intend to sell it
- How to manage the selling of your business and all the headaches that come with it
