Flow state
Alan Adams on maintaining a steady and sufficient cash flow
The simple act of not getting paid on time naturally impacts organisations of any shape, size and sector, but it can be most detrimental to SMEs. Recent stats reported by Natwest showed that two million of Britain’s small businesses fall victim to late payments, and 55% say that the number of these overdue invoices is only increasing. Not only does this mean that they’re spending valuable time and resources chasing these up, but it’s also diverting their attention from growing the business and striving for success.
Aesthetic practitioners essentially provide a ‘service’ (in addition to offering add-on products) and so aren’t bound to the often crippling 30-day, 60-day, or even 90-day payment terms. However, they are impacted by another major problem: the volume, average spend, and regularity of clients coming through the door aren’t predetermined.
Alan S. Adams, Director of The Clinic Coach, understands that maintaining a steady and sufficient cash flow can be a mounting pressure for clinic owners. So, what can you do about it? Here, Alan shares the importance of bringing awareness to your cash flow and explains a simple-to-implement strategy to help overcome any shortfalls:
Understand Your Cash Flow
“Owning a clinic is so much more than just providing a service that you’re passionate about and proud of, and that’s helping clients to achieve their own goals about how they want to look and feel. But, like all businesses (regardless of industry), it’s important that you’re rewarded for your time, expertise, and specialism – pay which exceeds what you could earn by working for someone else. Otherwise, what’s the point?
“The great news is that there are thousands of tried-and-tested techniques that help businesses become (and remain) successful.
“But first things first: you need to establish what commercial success looks like for you. Top-line, you must be able to easily cover your overheads and pay your staff a decent (and legal) wage. Plus, you must ensure there are reserves available to cover future investments, one-off purchases, and obligatory expenses, such as VAT (if applicable), tax, and other compliance-based costs.
Regular Retainers
“Many businesses start each month at zero in terms of cash flow and then work incredibly hard for the remainder to increase this figure. But this is a huge risk. And in business, making provisions to reduce risks is vital in ensuring longevity, future success, and – ultimately - peace of mind.
“Transferring your customers onto a retainer basis is well worth considering, allowing you to have more control over your cash flow. Meaning you’ll never start the month with zero again.
“But how do you do this? One strategy that many of my clients have achieved enormous success with is the introduction of ‘VIP Clubs’. Not only can it help to ease financial pressures, but it can also provide added value to your most loyal clients too. Win: win.
Implementing the Idea
“Create an exclusive offer for your very best clients, whether it’s a ‘VIP Club’ or ‘Platinum’ membership - but a scheme where customers pay a monthly subscription to be a part of something really special and where they benefit from exclusive extras in comparison to your standard service offering.
“Considered thought will need to be given to what you’re best incorporating as part of this, but it’s vital that you go above and beyond to ensure that customers can easily see the value.
“For example, you might choose to charge £150 per month but, in turn, offer treatments with a retail value of £200, early access to the latest products and services, and other bonuses as you see fit.
“Also, as with any business process, review the potential challenges prior to launching. Bear in mind that nobody likes to be tied into contracts, so to (again) reduce the risk, make sure it’s simple to cancel at any time they choose. (And then just make sure it’s too good that they’ll never want to).
“The number of people in your club or membership will, of course, depend on how many individuals your clinic works with. But aim for quality, not quantity – keeping it small and exclusive will ensure it retains its luxury VIP feel.
“The impact? Based on 20 members, paying £150 per month would generate an instant £3,000 for your clinic before you’ve even opened your doors. Impressive, huh?
“And you have the freedom and autonomy to tailor it to best suit your clinic’s ever-evolving needs and capabilities (and your clients). Also, you can try other initiatives within it, such as a pre-paid incentive, where the client pays for three months up-front and, in recognition, gets a month for free.
Launch the Club
“Once you’ve scoped out how your ‘VIP Club’ will look and feel, and you’ve finalised the details and value of your offer, the next step is to spread the word.
“A great way to launch it could be at an event – invite your very best clients for drinks and nibbles before announcing your brand-new exclusive offer and its benefits. Not all of them will take it up there and then, but once you’ve gauged feedback, you can tailor the offer as you see fit. Or open it up further by inviting other potential VIP members to join (keeping it within the realms you previously established to ensure it remains truly exclusive).
“Having a secure and sufficient cash flow is always important – especially in the current climate. And introducing schemes and initiatives, such as VIP Clubs and exclusive memberships, will be a win for both you and your clients – not only in the added extras they’ll receive but also because you’ll be in a much better position to make decisions and investments that really matter to the future of your clinic and the services you’re able to offer.”