Cash flow is king, especially in slow times. One way to speed up your cash flow, of course, is to shorten your terms, say from 60 days to 45.  That frees up over $1million for a business with $25 million in annual revenues. But when the economy is flagging you may not want to ask your customers to take shorter terms. Here are two ways to improve cash flow without pushing your customers to pay more quickly.

First, tighten up your billing process.  It’s not uncommon for a company to take as long as two weeks to get invoices out the door. If you’re a $25 million dollar company, every working day you take preparing invoices ties up almost $96,000!. Cut three or four days from your processing cycle, and you’re talking real money.

Second, offer discounts to customers who accept shorter terms. If you’re now offering 45 days, you might suggest a 3% discount to anyone who accepts 30. On a $10,000 order, that will cost you $300. But if  getting the $9700 fifteen days early helps you make a payroll or pay a vendor without drawing on your line of credit, you’re well ahead of the game. And remember that everyone else is looking for savings now. A discount policy for people who pay promptly may get you some new customers.

I had a great conversation with a top-exec yesterday about the changing relationship between huge corporations and the small businesses that sell to them. His take was that the way very large companies have used their power to drive down prices at their smaller suppliers has done some serious damage to many of those suppliers. As a result, some of the big players can no longer depend upon their smaller partner. He thinks that lots of the big guys are starting to realize that and re-evaluating their relationships with smaller partners.

I was , therefore, interested to read this post on Anita Campbell’s Small Business Trends:

Large businesses and small businesses increasingly operate in a finely-balanced and symbiotic ecosystem. Each needs the other. The major shift is that big companies slowly but surely are recognizing this. Instead of the typical competitive or vendor-buyer relationship that big companies and small businesses traditionally have had, the relationships are getting much more complex and interrelated and cross-reliant. This manifests itself in innovation programs, such as Proctor & Gamble’s trail blazing www.pgconnectdevelop.com, to things as simple as big companies plowing money into websites and resource centers that have nothing to do with the product they are selling, necessarily, but focus on general advice to small businesses, such as Intuit’s Jumpup.com. The result has been an explosion of free resources available to entrepreneurs and small businesses supported by Corporate America.

As Anita says, “This is a key trend for all of us as small business owners and entrepreneurs.” Think about your relationships with much bigger customers. Are they ready to treat you like a partner rather than a desperate suitor? What are they willing to do to help you serve them better?

It might be a conversation worth having.

If believe your IQ is fixed, you probably won’t get any smarter. But if you believe you can learn new things you will. That’s the message of a study by Stanford psychology professor Carol Dweck and others. People who believe they’re getting smarter tend to study harder, persist in the face of setbacks, and create wider neural networks, all of which makes them, well, smarter.

Isn’t it amazing what the right attitude can do?

According to an article in this month’s Wired, a little caffeine goes a long way. As the day progresses, your brain produces adenosine which is thought to create mental fatigue. Caffeine blocks the brain’s adenosine receptors, so you don’t lose your focus. But test subjects report that they felt clearheaded and calm-and thus ready for optimal performance-when they consumed small doses of caffeine throughout the day. So skip the Venti French roast and try cups of tea (with its lower dose of caffeine) throughout the day. And have a small high carb snack at the same time: it seems that glucose and caffeine together clear your head better than either does alone. The sacrifices you have to make to keep alert!

I met with two top executives this morning. One of the participants runs a small creative agency. Another manages a manufacturing company 1000 times bigger. One is a man, the other a woman. One has seemingly unlimited resources, the other has to scrape for every dime. Here are some of the results of the meeting:

• one left the meeting with a plan to rearrange top management to make the company more responsive, quicker to market, and more innovative. “We’ve been doing things the same way for years. I feel like this is going to really open up the future for us.”
• one left the meeting with three things to do immediately to re-energize and re-engage employees. “I’ve been worrying about this for over a year. This is the first time I feel like I know what to do.”
• one left the meeting with a plan to identify, recruit, evaluate, and reward employees based on behaviors and attitudes vital to the company’s success. “This is something I’m going to put in place right now, It completely changes how I think about my business.”
• one left the meeting with an idea worth tens of thousands of dollars over the next year. “I can’t believe I never thought of this.”
  

Can you guess who’s who?

It doesn’t matter. You don’t get fresh ideas from people who are just like you. You get them from people who are different. It always matters who is in the room, but maybe not in the way you think.

When leaders work together to help each other succeed, good ideas come from surprising places.

The average retailer spends about 10% of its Internet marketing budget on email, even though email is by far the best marketing value online. According to a study by Forrester Research for Shop.org, it costs an average of $71.89 to get an order using banner ads, $26.75 using paid search, and $17.47 through affiliate programs. Each order costs only $6.53 using email sent to a company’s customer email list.

That’s the average. But fashion retailer Barney’s has increased response to its email campaigns tenfold by 1) using simpler messages–featuring one product per email rather than 10 or 12, and 2) carefully mining existing data from its web site to target offers to the right buyers.

What if you’re not in retail? The same approach may pay off for you.

• some non-retailers may have a better sense of how to target specific offers to the right customers.
• some non-retailers may have smaller customer email lists, thus reducing costs.
• everyone can benefit from simple offers targeted to the right customers.

If you’re not using email as part of your online marketing, give it a try. You may improve your return and reduce your spend.

Read all about it in Fast Company.

Everyone I talk to says the economy is their biggest challenge right now. Then I met Steve. Steve owns four small companies in the outdoor sports equipment industry. He has identified precise niches and he holds a leading position in two of them He sees the economic slowdown as a great opportunity.

“When customers are spending less across an industry, most everyone loses revenue, and most everyone reacts in the wrong way. They cut costs, they lay off people, they do anything they can think of to reduce expenses and maximize margins. That creates opportunities for me.” What will Steve do? He plans to acquire his biggest competitor, hire some new key people (who used to work for other companies), and steal customers from businesses that have weakened their positions by cutting too much.

Not all of us can afford to buy out a competitor right now. So what can we learn from Steve?

• Some of your competitors will lose customers when they close locations, cut back on customer service, reduce marketing efforts. Go get those customers!
• A lot of great people are looking for work right now. That makes it a good time to get the key people you’ve been looking for. Look to hire the people you need to grow. They’re out there now.
• Your employees are worried about how slow times will affect them. You don’t want them brooding. Re-engage your staff by put them to work devising ways to strengthen the business. Make it clear that you want to emerge from slow times stronger than ever and you need their help to do it.
  

In short, if you want to make the most of opportunities created by a slow economy, don’t think about how you’re going to survive the slowdown, focus on how you’re going to come out of it in a stronger position than ever.

Forget thinking outside the box. Think outside your brain.

Andy Clark poses an interesting problem in Natural Born Cyborgs. A guy asks a woman on the street, “do you know what time it is?” She says, “Yes, I do.” She then looks quickly at her watch and says, “It’s 10:22.”

Is the woman telling the truth when she says she knows the time? I’m inclined to agree with Clark that she is.

But here’s the problem. A teacher asks his class, “Who knows the capital of Albania?” One student says, “I do.” He gets up, excuses himself, leaves the room, walks to the library reference section, and starts opening books. Forty-five minutes later, he walks back in the room and announces, “It’s Tirana.”

Is the student telling the truth when he says he knows the capital of Albania? most people would think he’s not.

Suppose someone asked you, “Do you know the Capital of Albania?” and you said, “Yes. It’s Tirana.” We’d probably all agree that you know the capital of Albania. You have the appropriate fact stored somewhere in your brain, and you can quickly reproduce it on demand. That’s what knowing something means, isn’t it?

Sure it is. And yet, I’m still inclined to agree that the woman who needs to glance at her watch knows what time it is. With Clark, I’d argue that it’s fair to say that you know the answer to a question if you know how to locate that answer quickly, whether you you have to look inside your own brain or elsewhere.

After all, it does take time to retrieve an answer from your brain. And sometimes it takes longer than others. If I were asked, “What’s the capital of Romania?” I might have to think for a moment or two before coming up with Bucharest. These days, I might even have to think a bit longer than a moment or two. But I’d get it in the end. And I think that should count as knowing, don’t you?

So if it’s not the fact that it takes some time to retrieve the answer that determines whether someone knows something or not, can it be that you have to get it from your own brain to count it as knowledge? That just doesn’t make sense to me. I believe, like Clark, that our minds extend beyond our brains. We ought to recognize that and take advantage of it.