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    4 Replies Latest reply on Aug 20, 2010 4:26 PM by mikevcpa

    We are growing so much that we are low on operating capital!

    Triplecap1 Newbie

      I have owned a legal services business for eight years. We have grown from a two-person operation to a more than 25-person operation in that time. This year alone we have hired three new people to keep up with the expanding business. We have had a 42% increase in sales this year alone and expect to finally break the million dollar sales mark this year based on the first half sales. The problem is, all this growth, coupled with the economy making payment times slower, has really hurt our day-to-day cash flow. We do have a business plan. We have maxed out our credit to fund the business and are currently paying that off. We have been turned down by several banks because we just don't have that many assets yet besides our personal home and furnishings. We had a line of credit of 40K which was maxed out years ago and now we're just making payments on it. Nobody will convert this to a long-term note. A new LOC would be exactly what we need. We are paying off our credit card debt and not charging anymore so we've reached a major turning point. We are so frustrated that we keep on growing with no money and nobody wants to help! Any thoughts or suggestions would be much appreciated!
        • Re: We are growing so much that we are low on operating capital!
          LUCKIEST Guide
          We are growing so much

          Who r u?? Where r u?? Go to Members page and share some info.

          Don't be frustrated. Be pro active. I can help. An accountant can help.

          It is great that you have a business plan. Are you following it??

          Why are you hiring more people when cash flow is tight??
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          1 of 1 people found this helpful
          • Re: We are growing so much that we are low on operating capital!
            phanio Pioneer
            There are several options for your business.

            First, you must be looking in the wrong places to consolidate your debt - we list several on our website that can easily help you - look for our "business loan" section.

            Also, there are many alternative (non-bank) lenders that have created programs and businesses just to service customers like you - again, we list several on our website.

            Lastly, there are ways that you can use your financial assets (not physical assets) to get funding - essentially using the ability of your business to grow to fund its future growth - termed leverage. Again, we list several resources on our site.

            Business Money Today
            • Re: We are growing so much that we are low on operating capital!
              alytus Scout
              you could raise your prices by 3% this would raise cash and slow growth slightly at the same time.
              some times the simplest thing is the best thig.
              • Re: We are growing so much that we are low on operating capital!
                Hi Triplecap1,

                That's great news. I think growth capital problems are the best kinds of problems to have. So much to do and I'm sure you'll get a lot of good ideas on this forum. I just joined and am rather impressed with all the knowledge available from this group.

                So, you are a services firm right? I'm just running through some rough numbers, but lets say you have 5 people dedicated to overhead (managment, facilities, HR, reception, whatever) and the remaining 20 are dedicated to performing the services. that gives us an average fee income of approximately $50k per person per year. If we assume that everyone is at least 85% utilized, then that would come out to an approximate billing rate across all employees of $30/hour. Does this sound about right? I have zero perspective on what you can charge for you legal services, but that sounds like a pretty good deal to me. Especially if you are one of a kind, like your profile says, you can probably charge a decent premium. Although, my numbers may be way off here, you should at the very least look at your structure.

                I agree with the previous poster that raising your rates slightly will slow your growth and bring in additional, much needed cash flow. Higher rates sometimes has the added benefit of weeding out customers that might have difficulty paying. Not always, but sometimes.

                Hope this helps.