Managing The Three Clocks Of Small Business

By
A A A

“Time Is On My Side,” is the title of one of the classic rock ’n’ roll songs performed by Mick Jagger and the legendary English band, The Rolling Stones. 

This bold statement works in a song, but for small businesses … not so much. The reason is because of the complicated dynamic between time and our most precious asset, cash.

In the marketplace, there are actually three different clocks at work that every business uses: one for operating expenses, one for sales and one for cash. Let’s take a look at how these three clocks impact your small business.


Operating Expense Clock

Every month like clockwork, regardless of sales volume, cash collections or profitability, payroll must be met, rent must be paid, taxes must be remitted, plus phone, utilities, insurance bills, etc., must also be paid. The Operating Expense Clock is hardwired to Greenwich, England for accuracy within a nanosecond per millennium, and nothing stops it short of a global, thermonuclear holocaust coinciding with a direct hit from Haley’s comet.

The only way to influence this clock is through operating efficiencies – you won’t be billed for what you don’t buy.

Sales Clock

This clock is powered by the customer relationships you’ve created so sales result each month. You project when each sale will occur by qualifying prospects and attributing a clock to each potential transaction so that you can budget future sales volume and meet your cash requirements.

How the Sales Clock operates is completely logical and intuitive, but it only works in your favor when the purchase requirements of customers have been met.

Cash Clock

What is not logical or intuitive is the Cash Clock and its relationship with the other two. Think of it like this: Cash is to sales as snow is to cold: You can have cold without snow, but you can’t have snow without cold. You can have sales without cash receipts, but you can’t have cash receipts without sales. And expenses are like weather – you get some every day.

But what hits small business owners hard is that for every glitch in the mainspring of the Sales Clock, there are 1,000 potential sprocket failures that slow or stop the Cash Clock. Consequently, the Cash Clock requires constant maintenance.

Murphy’s Law lives inside the Cash and Sales Clocks, but the Operating Expense Clock is immune to this insidious law and rocks on just like The Rolling Stones.

Write this on a rock...Small business success requires understanding the three clocks of the marketplace.

___________________________________________

 

Jim Blasingame is one of the world's leading experts on small business and entrepreneurship. He is the creator and award-winning host of the nationally syndicated radio program, The Small Business Advocate® Show.  In addition to his weekly columns, Jim is the author of two books; Small Business is like a Bunch of Bananas and Three Minutes to Success



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Small Business

Referenced Stocks:

Jim Blasingame

Jim Blasingame

More from Jim Blasingame:

Related Videos

Stocks

Referenced

Most Active by Volume

33,110,376
  • $113.99 ▲ 1.77%
25,034,179
    $17.98 unch
24,486,872
  • $7.41 ▲ 2.07%
20,864,535
  • $7.39 ▼ 2.76%
18,600,501
  • $8.30 ▼ 0.36%
17,530,211
  • $8.14 ▲ 3.17%
17,299,208
  • $93.79 ▲ 2.74%
14,669,760
  • $25.78 ▼ 0.19%
As of 12/26/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com