It’s that dream contract that could transform your business. A major new deal that is going to ignite growth and propel your company to the next level.
This is amazing news, time for toasts and celebrations. You’ve hit the big time.
But be careful. Don’t let your over excitement and eagerness at winning this new contract cloud your good judgement.
Once you’ve recovered from the celebrations, this is a time for sober consideration and preparation to ensure you make a success of the deal.
1) Manage your payment terms
The bigger the company and the contract, the longer the payment terms they are likely to try and impose so don’t let yourself be bullied. You can either argue for regular 30-day payment terms, which may or may not be accepted, or you must arrange your company finances so that your cash flow can cope with much later payments.
If it is a project, ensure that you demand a significant proportion (ideally 50 per cent) of the fee upfront before starting the work, with the rest being paid upon completion.
This is also a good opportunity to review payment terms with your own suppliers and make sure you are not paying upfront for things that you do not need to.
2) Review resources
Make sure you do a proper breakdown of the work, equipment and staff resources required to service the new business win. This will enable you to reassign the relevant staff’s time or, if need be, bring in additional support whether in the form of permanent staff or trusted freelancers. If new equipment is needed, what sort of capital cost will this incur and how will you pay for it? Will you need to outsource any work to companies with alternate expertise?
Bedding in a big new contract is always particularly time intensive as your team strive to put the appropriate new systems and processes in place while getting to know the client, what they want and what will work best for them. Bear this in mind when resource planning – you cannot treat a new client like a longstanding existing client.
Regular reviews of work flow, time sheets resourcing and servicing levels are essential and should demonstrate when the initial flurry to get the client bedded in calms down, enabling you to adapt accordingly.
3) Do not neglect your existing clients
There is always a danger when a company wins a big new piece of business that they will neglect existing clients. You must not let this happen. If staff allow relationships with existing clients to go sour there is a very real risk you will lose that business. This could end up undoing all the potential good of the new business win. Companies that lose clients as fast as they win them will never grow or develop.
Anyone who has run a business knows how much time and resource is poured into winning a new contract. As already mentioned, once won, a new client demands far more initial staff time and effort than a longstanding client whom everyone knows. So, the longer you can keep your clients, the more profitable they generally become. Whatever you do, look after your existing clients. It is a lot more expensive and difficult to find new ones.
4) Most importantly, protect cash flow
A big new business win is great news and offers the long-term potential for growth but, short term, often demands some significant outlays in the form of new staff, equipment and more.
This, combined with the widespread problem of late payment in the UK, can make cash flow challenging. Most businesses do not fail due to a lack of orders but due to a lack of ready cash. In our 2018 survey of business owners and senior managers, 10 per cent of respondents said cash flow had been a cause for concern in the last year of trading.
The problem of late payment is getting worse with businesses with an annual turnover of less than £1 million waiting an average of 72 days for invoices to be paid, according to the Department for Business, Innovation and Skills.
So, look at ways of managing and protecting your cash flow such as invoice finance. Invoice finance providers enable SMEs to use unpaid invoices to draw the money they are owed and, where wanted, will take over the credit control, removing the stress of chasing down the unpaid invoices, saving staff time and ensuring payment is secured.
This can be a vital lifeline at the start of a major new contract when the promise of money owed would mean nothing if the mounting bills could not be paid.
So, think ahead, plan well, protect cash flow and within a few months, your business should be flying.
By Optimum Finance CEO Richard PeplerTags: cash flow, invoice finance, management, New Business Categories: Blog