The recent COVID-19 crisis has released an economic onslaught. Consequently, businesses have been closing left and right. Doesn’t matter if you’re a mom and pop business or a multi-national corporation. Everyone is affected. And when I say everyone, I mean everyone.
These unprecedented times, we start to realize just how important business development basics are. If you’re a business owner and you’re reading this, you have probably learned more in the past few months than you have since you started your first venture. And that’s one of the many blessings that Coronavirus has brought. But that’s not to say that this has been one of the toughest times to be an entrepreneur.
One of the basic lessons that we learn through this trial is the importance of cash flow. That sounds pretty basic, but sometimes it’s easy to forget that liquidity is one of the most foundational essentials to surviving and thriving as a business. Don’t get me wrong- money is not all that matters in business, but it’s an absolute non-negotiable. No cashflow no business. So how do we create a strategy for business sustainability in a crisis?
A Lesson from the Prospectors
How can we build better cashflow and keep our business sustainable even in the toughest times? To that, I refer to a story from the American gold rush.
If you lived in California during the mid-18th century, you probably knew someone who was a prospector. During the Gold Rush of the century, over 300,000 people came to the region to try and find their share of the gold. In that period, the population of San Francisco rose from 1,000 in 1848 to 25,000 full-time residents by 1850.
During these times there were basically three people in the California Gold Rush.
- #1. Gold prospectors. The most highly-coveted career, but the reality was that not everyone made it big. The search for gold was a very erratic business. Some months you hit the jackpot. Other months or for even longer periods, prospectors would go empty-handed.
- #2. Tool Suppliers. The second-biggest industry in the town was tool shops that sold to prospectors. They had a steady supply all year round and were very stable. The only problem was that they never really had any room for expansion. The business stayed the same.
- #3. Those Who Did Both. The last category of businessmen were those that did both. They supplied tools to other prospectors, but also joined the hunt. These businesses had the advantage of sustainability and opportunity for growth when they struck gold.
The Best Strategy to Sustaining Business Even in Crisis
In business, our goal is to be the third kind of business in the Gold Rush. We need to be smart enough to spot both recurring income and one-off jackpots. In entrepreneurship, we need to take risks, but those risks should be calculated.
In my business, I’ve done that by building two streams of income. The bigger stream of my income is from consultancy work. I work with clients who pick me up on a recurring basis. These long-term relationships have been the bedrock of our revenue for the whole of the crisis period. The second stream of my income is one-off opportunities, which include my book sales, per project consultations, speaking engagements.
Being a business with these two streams of income is a great way to keep sustainable even in hard times. Quick question for business owners: Do you have those two streams in place? Are you providing your services to a market with a perpetual need? Do you have opportunities for growth and expansion?
Patrick Mabilog, patrickmabilog.com