Running a creative agency or any kind of small business demands next-level multitasking. Not only do you have to worry about clients, big projects, and keeping your team paid, but finances have to be managed as well. When you have that many plates in the air, some of them, inevitably, are going to come crashing down.
More often than not, the first plate to hit the ground is cash management. After that, business owners tend to find themselves in what seems like an endless downward spiral of financial panic. We’re here to tell you two things: one, you’re not alone. That experience is much more common than people realize. And secondly, we have a solution for you.
The Downward Spiral: When Cash Management Goes Out the Window
The scariest aspect of bad cash flow management is the ripple effect that it can have on the health of an entire business. We’re going to run through some of the most common pitfalls of cash flow management that we’ve seen, and what caused them:
Unpaid Bills
Unpaid pills are a common occurrence when cash flow goes unmanaged. An example of how we’ve seen this being played out is probably best displayed by Sarah, a freelance photographer who started working on the side of a full-time job. Though Sarah was making great money from her photography clients, she wasn’t keeping track of her expenses.
Photography equipment, travel costs, and insurance for her gear all started to add up and before she knew it, she couldn’t seem to pay her bills. The most crushing blow from that experience was that without cash to cover her expenses, Sarah couldn’t take on more work. Problem is, she desperately needed income to pay the bills she was already behind on. She very quickly felt trapped and without an idea of how her finances had gotten so muddled in the first place, Sarah found herself unsure of how to continue with her business at all.
A Personal Financial Crisis
When you run your own business or creative agency, the line between business and personal finances can become very blurred. This gets particularly dangerous when a business goes through a rough period. Bob, a graphic designer with his own creative agency, saw first-hand just how slippery the slope can be of patching up business finances with your own money.
He put all his energy into delivering quality work for his clients and though it meant that he was able to pick up great projects, Bob’s finances began to take a dive. Like Sarah, it was simply a matter of financial neglect. So many creatives end up in this position because they forget that producing beautiful work is only part of keeping a creative agency alive – finances have to be managed properly too if the business is to have any longevity.
After ignoring his finances for too long, Bob inevitably hit a cash flow crisis and started using personal money to cover expenses and pay his employees. By doing this, he decimated his own savings and never actually got on top of the real problems at his agency. He just kept covering them up with his own money until that threatened to run out too. Without dealing with the core issue, the cycle just continued, and Bob soon felt stuck in a situation he had no idea how to dig himself out of.
Crippling Uncertainty
In both the examples that we’ve mentioned and many more that we’ve seen, as people find themselves trapped in these seemingly impossible financial tangles, the uncertainty is often the hardest part. How can you stop the spiral if you don’t know how you got there in the first place and are too overwhelmed to see a way out?
That uncertainty has practical consequences, as well as mental ones. Sarah’s experience showed that if you can’t cover your expenses, eventually it will prevent you from taking on more work. She could not perform the job of being a photographer without her equipment being up to date and covered by insurance. Bob faced even more challenges with the pressure to keep an agency and his entire team afloat. Even though he could keep things moving thanks to his own savings, he then had personal worries to contend with.
Being creative and productive in a headspace like that is nearly impossible. Even if you’re lucky enough to be able to keep taking on work through a cash flow crisis, chances are you’re not performing at your best. That’s not healthy for you or your business.
Break the Spiral
If you’re stressed, missing out on work opportunities, or just overwhelmed by a financial crisis you can’t get a handle on, we have the tools to help. Dryrun can help you not only better understand your cash flow but predict future shortfalls so that you can plan accordingly.
How you break yourself out of your downward spiral starts by taking charge of the situation and getting up close and personal with your finances. Dyrun makes it easier to see what’s coming into your business, how much is going out, and where the gaps might be.
Take Control of Your Cash Flow
The most common mistake we’ve seen small business owners and creative agencies make is ignoring their finances and hoping that with enough revenue, any cash flow problems will just sort themselves out. This isn’t a sustainable approach and if you want to keep being your best creative self and build your business, it’s time to take control of your cash flow.
Break the downward spiral by having a fresh perspective and a clear view of your business’ finances. It’s all up from this point.
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Fight 'Feast or Famine’
Model the future of your cash flow, sales and scenarios in a single source of truth, to smooth out your revenue and achieve a steady stream of income.
Spot the peaks and valleys ahead of time so that you can adjust your capacity, backfill sales, and pick and choose the best projects, generating more money with the same team.
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