When managing a small business, owners will say cash is king. Or, as Zeynep Ilgaz will tell you, “cash is queen.”
Ilgaz, founder and CEO of Confirm Biosciences, Inc., started her business, as many small business owners do, with her own funds – in her case, $2,500. Getting from there to the $14 million revenue business she leads today was an exercise in cash management that took a very disciplined approach.
“When we started, we were laser focused on managing cash,” Ilgaz said. “Our philosophy was that if we didn’t have cash, we didn’t have a business. So we implemented strategies to bring cash in as fast as possible and slow down paying cash out.”
Confirm Biosciences is a worldwide provider of substance abuse and health testing products and services. Managing cash flow meant keeping costs to a minimum. The company initially started online and didn’t carry inventory.
“We drop-shipped product and required payment upfront. We would collect payment by credit card or wire transfer to reduce risk, and we eventually leveraged a line of credit to help manage cash flow,” Ilgaz explained. “We also worked with our suppliers to extend payment terms, which allowed us to be in control of cash outflows.”
“Our mentality was always to get cash in advance to pay for our growth and cover costs.”
The strategy worked. In 2008, when the company started, Ilgaz and her husband occupied a small, 1,000-square-foot building. It was just two people and one big dream. Today, 10 years later, the company resides in a 23,000- square-foot facility in San Diego County, employs over 50 teammates and sells product worldwide – both on a wholesale and retail basis.
“I get asked if there was a defining moment in my business that really set the course of our success,” Ilgaz said. “I think there are several important factors – first, be honest and transparent, and represent who you are, and then have a mindset of being flexible and able to adapt and change. We have always maintained the philosophy that managing cash is the most important strategy, and that lens helped us to continue to look for opportunities to increase control over cash.”
Today, Confirm Biosciences warehouses its own inventory, which allows the company to maintain tighter control over quality, execute faster, and reduce the administrative costs of working with third parties.
“I also advise small business owners to organize a Board of Advisors, which is different than a Board of Directors,” Ilgazexplained. “Our advisors have helped provide critical coaching and mentoring. For example, when I made a presentation to Walmart, one of our Advisors was a very powerful CEO and able to provide invaluable insight on how to pitch and approach a large retailer, and this guidance helped us win this contract.”
The importance of managing cash is a frequent concern expressed by small business owners. It is a recurring theme that appears in small business surveys, including the Bank of America Small Business Owner Report. “Strong cash management means leveraging forecasts to manage cash, and always knowing what your cash needs are throughout your operating cycle,” Ilgaz said. “Maintaining good relationships with vendors, suppliers, creditors and your banker can help a company establish terms to help manage cash flow needs. We knew, for example, that the move into retail meant we would need more cash, and that the margins would be tighter than wholesale. Timing became that much more critical, and the increased focus on cash management that much more important.”
Another best practice for small business owners to consider is to remain connected with nonprofit organizations that support small businesses, and provide a forum to share ideas and experiences. One such organization is the National Association of Women Business Owners, or NAWBO. “Be willing to reach out, listen to the experiences of others, and be open to change,” Ilgaz said. “The relationships you build with other business owners and leaders can help you gain insight into your own opportunities. All great companies start with great relationships with others.”
Meet Karen Harrison, SVP/ Small Business National Credit Performance, Bank of America Small Business
Learn more about NAWBO
Bank of America, N.A. provides informational reading materials for your discussion or review purposes only. Interpretations in this release are not intended, nor implied, to be a substitute for the professional advice received from a qualified accountant, attorney or financial advisor. Neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.
About Karen Harrison
A 25-year banking veteran, Karen has held senior executive management positions at leading financial institutions prior to joining Bank of America in 2011 as the Small Business Banking Manager for San Diego, Imperial and South Riverside counties. During her tenure at Bank of America, she has also served as a National Sales Performance Manager for Small Business and Market Manager for the Small Business Client Management team for the West Region.
Karen is actively engaged in the community and is a recipient of the Global Diversity and Inclusion award at Bank of America. She currently serves as the Executive Sponsor for Bank of America Community Volunteers/San Diego Market, Chairman of LEAD for Women, San Diego Chapter, as well as serves on the Board of Directors for LEAD San Diego, Junior Achievement of San Diego, and the National Association of Women Business Owners (NAWBO) San Diego Chapter, the Women’s Leadership Council for the United Way, and the California’s Women Leaders Network at Bank of America. She is a former Big Sister for Big Brothers/Big Sisters of America. An honors graduate, Karen holds an MBA from the University of Phoenix and a BA from California State University, Fresno. Karen is married, resides in San Diego, California, and has eight Godchildren.
Link to original Article: https://smallbusinessonlinecommunity.bankofamerica.com/community/managing-your-finances/cash-management/blog/2018/02/07/why-cash-flow-can-be-an-important-factor-for-small-business-success