Now I want you to try and explain this simple concept to the large companies in America and world wide. They cannot seem to understand that as a small business I need to get paid faster. As a small business I need to turn my money quicker. As a small business I am not their bank.
The answer from them, however, is simple, “if you cannot hang, then we have many people knocking at our doors every day”. You either deal with the terms we give you, or you drop out.
As a small business, we love large clients. The work is plentiful, the rates are great, they keep asking for more. Yet as a small business we only have so much cash.
In the high tech contracting business this can be a total nightmare. You can have great big contracts, many sub-contractors and not enough cash. It really stinks when you have to turn down work because you know you cannot pay the sub-contractor in the time they need to be paid. Your bank will not give you any more on you credit line, your credit cards are maxed out. And you just cannot handle anymore debt.
So how is a small business to grow? Is this why so many small businesses never do grow, they stay small forever. Do you have to let the work go to some other, large firm? The answer should be, “no way, I am a business person and I want to make money, I have to find a way to make this happen”.
In comes factoring. The knight on the white horse. For many years it was not thought of well, it was the first step to bankruptcy. But not anymore. Now for a minor fee you can complete. You can get the cash you need. You can keep on growing.
Very simply put.
You hire a new sub-contractor at $75 an hour, billing her at $100.
She works for you 40 hours a week, billing $4000.00
She gets $3000 a week.
She bills you every 2 weeks with a 2 week due date.
You bill your client every 2 weeks and he takes 60 days to pay.
No problem You take your invoice and factor it, getting 80% of the invoice in a week.
That covers your cost and you still have a little left.
With factoring, you can grow your business to great new levels of success.
Let’s look at another simple example:
If you contract people at $75 and hour and bill them at $100 an hour You bill the client $4000 a week and it costs you $3000 a week.
You make $1000 per person per week.
If you can get 10 of these on board you can be generating 10k a week.
But you have to pay 30k a week to them.
Now if your client pays in 60 days and you have to pay in 15, you are in trouble and you cannot grow.
But, it you factor, you get your money in plenty of time to pay the people and just wait on the profit.
If you want to grow your business, and money is an issue, you need to look at factoring. Simply put, this is a great tool to help you grow.
Manny Nowak is a developer of tools to help the entrepreneur and business owner to grow and build their business. To learn more, click here.
How to Build a High-Tech Contracting Business without Loads of Cash. - To learn more about this author, visit Manny Nowak's Website.
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