If you have a vegan business, you have found your tribe

Hello and welcome to episode sixty-seven of The Vegan Business Tribe Podcast with myself David Pannell, co-founder of Vegan Business Tribe. And if you have a vegan business, or are thinking of starting one, then Vegan Business Tribe is here to support and inspire you not just to build a vegan business, but to build a SUCCESSFUL vegan business.

And we’re going to have one of those boring but important episodes today, but don’t worry – I don’t think that ANYTHING could ever be completely boring in Vegan Business Tribe! But you will have just heard me opening the podcast, as I do every week, by saying that I want to help you run a SUCCESSFUL vegan business – because if you run out of money, or you just burn out because you have to work too many hours to turn a profit then you can’t help us move the vegan cause forwards. If you started your vegan business to actually make a difference, to help bring about a fairer cruelty-free world, as many of us did, then you need to start taking what you are doing seriously. And that might mean learning some of the basic business skills that, up until now, have just been a complete mystery to you, but once you have learned them they completely change how you approach your business.

So before we jump into that and get our serious head’s on just a quick reminder that whatever stage your vegan business is at – you are not alone. We have a huge community of vegan business owners just like you over at Vegan Business Tribe, and if you are looking for support while at the same time wanting to support our mission to champion the vegan business scene around the world, then I would love to invite you to become part of our community too. As a member of Vegan Business Tribe you get access to all our content, our courses and collections, our online networking meet-ups and business clinics and also access to myself and Lisa through our community hub. And we are here for you to use, you can come to us with your questions and problems in the hub, because if we don’t have the answer for you then we’ll be able to tag in one of our other members who likely will. So go take a look at the website at veganbusinesstribe.com, click on the join button on the homepage and before you know it you can be part of the most amazing community of vegan businesses owners you would ever hope to meet.

OK, so today we’re talking about what is probably THE most important thing in your business. And that is cash. Money in the bank. And before you argue with me, yes I know that many of us are not doing what we do for the money, but let me tell you – there’s no way to do what you do without it. Money is the basic lifeblood of a business, no matter how unethical that makes you feel. Wages need to be paid. Suppliers need to be paid – on time – or they will soon stop supplying you. Taxes, unfortunately or fortunately depending on your world view, need to be paid. Promotions need to be paid for, materials need to be bought, loans repayments need to be met – and if you’re lucky, at the end of all that you might even get to pay yourself too. If that money stops, then your business stops, which is why there is a business saying of ‘Cash Is King’. Because I don’t think I’ve ever either had a business or been involved with a company that hasn’t faced a cashflow pressure at some point. Even the most successful, profitable companies can have cashflow problems, then they don’t have enough money on hand to cover all their bills at one moment in time, and it’s entirely possible for a company to be hugely profitable on paper but to run out of money in the bank. And when that happens, no matter how much work you have in the pipeline, or how large your debtor’s book is with invoices due to be paid to you, you’ve got a problem.

So the trick in business is to make sure you avoid this situation entirely, or that you have so much notice it’s going to happen that you can do something before it does. Because this is why, in my opinion, you have more security when you have your own business or work for yourself. I’ve spent the vast majority of my career either as self-employed or an employee of my own business, and my friends who have always worked for large companies have often asked me how I dealt with the financial insecurity of working for myself. And I would ask them this question: if you work for a large company and you got told that you were losing your job at the end of the month, how long do you think your boss knew that was going to happen before you did? Maybe a month or two before? And how long do you think THEIR boss knew that if things didn’t improve in the company that they would likely have to make some lay-offs. Perhaps six months before. And what opportunity did YOU have, as an employee, to do anything about that? Likely none at all, because you were busy just doing your job and had no idea what else was happening in the company. But let’s flip that around to your own business. If you looked at your cash forecast for your own business, and you could see that in six months’ time your company was likely going to run out of money – what would you do about that? You’d do SOMETHING wouldn’t you? You’d really have a push on your sales, you would change what you were doing, you’d look at a way to cut costs or to have other incoming coming in, in short, you would take action to make sure that didn’t happen and you’d have had six months to do it.

And that’s the difference between having your own business and working in someone else’s. When you have your own business you have the opportunity and the SECURITY of being in possession of all the facts. You don’t have someone above you who knew where the current path was leading and was happy just to let you and your job walk off that cliff as a way to solve the company’s cashflow problem. If you employ people yourself, you also have a responsibility to make sure you are looking ahead to ensure that your company remains in a position to pay them. And you can’t do ANY of this, if you don’t have those facts at hand, if you don’t have a reliable forecast of what money your company is going to have in the bank in three, six or even twelve months time. Having a financial forecast allows you to take really important decisions about the direction of your business with some degree of certainty. It’s like being able to spot that your business is going to hit an iceberg in a few months’ time but having the time to change the course of your ship. It allows you to see potential problems whilst you still have the time to fix them and to shake things up if you realise that if you keep doing what you are doing, then you’re not going to be any better off in twelve months’ time than you are now.

So how do you actually do this, how do you start forecasting where your business is going to be and how much money you’re going to have in the bank? And if you avoid doing all this stuff because you haven’t got a head for figures then I’ll let you into a little secret – neither do I. I’m the sort of person who can add up a column of figures three times in a row, with a calculator, and get three completely different answers. But I still managed to get my head around basic cash forecasting very early on. Now, if you have your own bookkeeper or accountant, start there. They will very likely already have a template you can fill in to produce your cash forecast or your accounting software might even be able to do a lot of it for you. And if you’re looking for a vegan accountant then just come and get involved with Vegan Business Tribe and we can introduce you to one that’s appropriate for your size of business, or just Google Vegan Accountants.

But for most of us, all you need is a spreadsheet. You can use Excel or Google Docs but start by putting the months of the year across the top, and then in each column you need three basic sections. And if you can’t visualise this then again, just Google a cash forecast spreadsheet so that you can see what we’re talking about. So first in that month’s column, which might be April for instance, we need to list out all the money that is coming INTO your business that month – and remember, we’re talking about CASH forecasting, so that’s actually money that will be landing in your bank, not invoices you have raised. Until those invoices are paid that’s just a number on paper, not cash in the bank. So it might be that you have estimated sales figures you can use, or it might be that you have retainers that are constant or that you’ve just raised a big invoice that is due in a month’s time, so you would put the expected money coming in from THAT invoice into next month’s column.

Below your money in, you need to list all the money that is due to go out of your business in that month. Get this as accurate as you can. Go back through your company’s bank statements to find all those running costs you might have forgotten about, online subscriptions, supplier costs, rent, rates, marketing budgets and also include paying yourself and your staff. And again, project ahead for when big bills will be due – for example if you pay a supplier once a quarter then get that in your forecast in the relative month that money is due to go out. Put in when your corporation tax is due and an estimate of how much it will be (and in fact, if you’re really clever with spreadsheets, once you have this cash forecast set up you can actually use it to give you an estimate of what your tax is likely to be) but also make sure to include a row for things like any loan repayments your business may be making. Once you’ve got all your cash coming in and cash going out into a column, it’s then a really easy auto-sum to minus one from the other to tell you how much money you’ll be better off that month. Hopefully, that will be a positive number rather than a negative one, but don’t worry if it’s not because that’s why we’re doing this forecast in the first place, to work out the reality of your business.

Then, the last thing to do in that column is put the opening statement of your company’s bank balance that month at the bottom, so how much money was in your bank on the first of the month, and then you can add (or minus) your estimated cashflow from it to give you a forecast of how much money your company will have in the bank at the end of the month – and therefore a forecast of what your starting balance will be for the month after. And looking at cashflow forecasting in its simplest form – that’s pretty much it. If you fill out a spreadsheet with your estimated money in and money out for each month for the next three to six months, and if you’re as accurate as you can be in that, then it’s a bit like having a crystal ball – you’ll be able to peer into the future of your company’s finances. Lisa is the chief cash forecaster in our business and she is amazingly diligent in keeping the forecast up to date. It’s rare that what our cashflow forecast estimates we’ll have in the bank in a few months is off by more than a hundred pounds or so, and that’s what you have to get into the habit of doing too. So if you win a new contract then estimate when the money is likely to drop into your account and update your cash forecast. Or maybe if you win a new contract you are going to have to spend first, you are going to have to buy-in supplies and materials to fulfil the order or pay freelancers for the work before you get paid from the client – put all that money in and money out around your new order into your cash forecast too. Every time you know you’re going to have new money coming in or going out, your first thought should be seeing what that does to your cash forecast, what impact does it have on your business.

And the great thing about spreadsheets is that once you have your columns and sums set up that you can keep extending that cash forecast to look even further in the future. Now, this is a bit like weather forecasting, the further you look into the future the less accurate the forecast is going to be. But when you start to look further ahead that’s when you can really start using your forecast to make important decisions about your business. It starts to give you clarity. For example, if you do a six-month cash forecast and you can see that in four month’s time your forecasted bank balance goes below zero, then instead of that seeming to just hit you out of the blue and you having to deal with that in the moment, you’ve just given yourself four months notice to do something about it. You’ve spotted that iceberg before you’ve hit it and you’ve given yourself time to change course. At the very least, that might be identifying that you need to get an overdraft facility in place if your cash forecast shows that you’ll be back in the positive a month or so afterwards – and remember, banks always seem a lot happier to grant you an overdraft when you don’t need one so this gives you the chance to have that conversation with them. But better than that, it also gives you the opportunity to try and do something to improve the situation before it happens.

It might be that on paper, your company is fine – you’ve got plenty of invoices due to come in that will get you out of that cashflow problem very quickly so in that case you might switch your focus to getting that money in sooner. Can you pull some work forward to cover that cashflow gap, or can you negotiate a customer part-paying you sooner or you paying a supplier later? For example, if you currently pay a supplier on 30 day terms, ask if they will move you to 60 days instead. Extending payment terms with a supplier is the same as taking a payment holiday on a mortgage – you still have to pay the money but you get a month’s respite and that can have a really positive impact on cashflow. And because you know the situation is coming up ahead of time you can deal with it using a bit of creativity, not in a mad panic because you’ve just realised you’ve not got the money in the bank to pay your staff.

But it’s not just about looking forward to give yourself time to avoid hitting those cashflow icebergs. When you can see the likely finances of your business laid out in front of you in a spreadsheet for the next six months to a year, then you can start playing about with some of those figures and see what happens. What if you cut out some of those costs in your business? Do you still need to rent that extra office space and what difference will that make to the cash you’ll have in the bank in six months if you were to get rid of it now? Take that expense out of your cashflow and see what happens in your spreadsheet? What if you stopped offering your customers 30 days to pay so that the cash came in on the same month you raised the invoice, or if you started taking a deposit payment upfront, what difference does that make to your cashflow? What if you increased your sales by just 5% each month – and putting a sum in a spreadsheet to calculate things like that automatically is really easy – but what difference would that make to where your company will be in a year’s time. You can look at what might seem really insignificant figures in your business but realise the compound effect of those figures over a year of your business. That £100 a month you’re paying out for something you don’t really need. That extra 10% you could put on your prices. Those two things put together might be the difference in twelve month’s time between being in the red and being comfortably in the black and you never realised.

And this is when you can really start to plan the growth of your business – and in my experience, a nicely growing business isn’t always down to the big things, the big new product launches and the big marketing plans; it’s often about being in control of the little things and just being very diligent about making continual improvement. And once you have all your monthly figures and forecasts laid out in a spreadsheet this is when you can see all this, this is when you can play about with those figures to see what a difference it will make to where your company is in a couple of years’ time. I’ve seen more companies grow by focussing on increasing their sales by just a few percent each month than I have companies coming up with some new big idea that makes them a huge success overnight.

Doing a forecast like this might also give you a shot in the arm. If you’re struggling in business and you put together a forecast and see that in another two years you’re likely to be no better off than you are now, then it’s time to shake up what you are doing. You can see that you are going to have to do something different, or maybe even drastic, to move your business forwards. But in the same way it may show you that you are doing better than you think right now too. And once you’ve got your money put aside to pay your next tax bill, and once you’ve got that buffer built up against unexpected costs, then you might find that actually, you’ve got a bit of money that you can invest back in the business than you realised. Yes, you can afford to take on that person to do your social media for you; yes you can afford to upgrade your IT systems so that your customers get automatic reminders instead of you having to do everything manually; yes, you can pay off that loan early to avoid the extra interest; or yes – you can actually do something with that money that aligns with your company ethics. You could back a charitable vegan project or afford to donate some of your time free of charge to worthy causes.

Or maybe, just maybe, you could even afford to take a back seat much earlier than you thought you could. Again, I’ve seen this in businesses where the owner comes to retirement and their financial advisor or accountant points out that with the revenue they are earning they could have actually done it years earlier or simply brought someone else in to run the day to day business and still be able to take enough money out to live well. But they had just never looked at the figures or done the forecasting to give them the confidence to do it.

And then finally, what if you’ve been listening to this and you’re thinking, well this all seems a bit too much like hard work. What if like me you just don’t have a head for figures and you’re no good at keeping on top of things like this. Well, to be honest, you need to get good. Like I said right at the start, if you’re in business to actually make a difference in the world then you owe it to your mission to learn these basics of business planning. Your bookkeeper or accountant will help you, and if you are really struggling then at the very least bring in your friend, your partner or your son or daughter, anyone who’s good at organising, and make it their job once a month to go through and update your cashflow with you. Imagine how slow you would have to drive your car if you could only see a couple of feet in front of you, well that’s how slow your business will end up moving if you can not see further ahead than a few weeks. If you don’t, you will always be having those unexpected cashflow problems, those unforeseen expenses, that tax bill that seems to come out of the blue. You’ll not see those icebergs until your ship runs straight into it. So, if you don’t have a cash forecast for your business, no matter how large or small your business is, when you’ve finished listening I want you to go out and set one up – today. Because that extra information will enable you to make really informed decisions about the direction of your business, what you can afford to do, what you can’t, and what changes will make the biggest impact.

OK, so let’s round-up with a quick recap of what we’ve just covered about how to create a cashflow in your business and why cash is most definitely king.

1. And we’ll start by repeating that statement: cash is king. You may have a really profitable business on paper, but the moment you don’t have any money in the bank to pay your bills, suppliers and staff, no matter how much money you have due to come in later you’re in trouble now.
2. But if you know the reality of your business and have a forecast that knows how much cash you have coming in and out of the business, then that gives you the opportunity to make sure you never get into that kind of trouble. Even with just a month’s notice of an upcoming cash-squeeze you can try and pull invoices owned forwards, re-negotiate terms with suppliers or at least get an overdraft facility set up to cover it.
3. Your accountant or bookkeeper will likely already have a cashflow template set up as a spreadsheet that they can give you, or your accounts software may even have cash forecasting built-in. Simply Googling ‘cash flow forecast template’ will show you plenty of examples – remember we live in the information age after all.
4. Having a cash forecast not only helps you avoid those financial icebergs that might sink your business, they also let you plan the growth of your business too. When you have a spreadsheet set up with all your company’s incoming and outgoings you can play with those figures to see what a difference just increasing your sales a few percent each month makes.
5. Your forecast might also give you a shot in the arm. If you can see that in two years’ time you’re likely to be no further on than where you are now, then now is the time to change and do something about that. And the opposite is also true, maybe your forecast shows you that, actually, you could easily afford to bring someone else in to run the business for you and still take out a good living without having to do the day-to-day work!

And that is it! Now I categorised today’s session as boring but important, and hopefully, it hasn’t been TOO boring. And like I said, we’ve got a lot of experience amongst our community in Vegan Business Tribe who can help you with this, and just like you they are all vegan too, they share your ethics so they want your business to succeed. Just head over to veganbusinesstribe.com to find out how you can join us and also how your membership means that we can keep putting out this podcast every week and keep putting out all our content and helping vegan businesses across the globe.

As always, if you found this session useful then please hit subscribe, or write us a five-star review if you are signed up to iTunes, or a thumbs up, or whatever your platform allows you to do to show your support – it really does make a difference. And if you know someone with a vegan business who you think would benefit from knowing more about today’s topic then please do send them a link to the podcast.

Thank you so much for giving up your time to listen, we appreciate it more than you can imagine, and I’ll see you on the next one!