Money can't handle rudeness

Regardless of their size, companies always face risks, whether from the market or from their decisions. Furthermore, a risk like Covid19 makes us much more vigilant when it comes to innovating. However, in new ventures, whether it is a new product, a new business or the opening of new stores, the financial risk is not always assessed in detail. In this time of global crisis, we have a very high level of uncertainty that brings this problem to the surface, which is often neglected by companies. Depending on their contribution margin, some businesses allow companies to commit resources to unsuccessful projects.

But be careful! As I always like to say, “money can’t handle much disrespect.”

In this article, I want to present you in a simple way a great way to reduce the financial risk of your projects to resume the company after COVID19. Of course, this tip can be used later!

First point of attention – Project cash flow

Whenever we start a new project, we will have to invest a large amount of resources, money and labor, among others, to keep the project going. Few people have the practice of planning and calculating project expenses. Sometimes they are forced to stop, postpone or cancel projects, even when they are quite advanced in the work due to lack of cash flow. Unbelievable? Yes, but it happens a lot. See the figure below. What the lack of organization prevents is noticing that in the beginning the project only consumes resources and a lot of money, with the promise of earning in the future.

Therefore, your company must be prepared to have money to support the period in which the project requires cash flow. If not, there are interesting options on the market, such as government funding sources for innovation in various areas.

The tip is to plan and be very careful so that the project is carried out without affecting the company's other activities, as you cannot kill the cash cow with an uncertain innovation that requires rivers of money.

Second point of attention – Return Time

Due to the lack of planning, there is also another major problem in projects: the lack of an estimate of the time it will take for the resources invested in the new project to return. It seems so obvious to have this number, since everyone who invests wants to see a return and profit on the invested capital as soon as possible. In practice, I have come across several organizations where this number is “guessed” or “imaginary” with no connection to reality. If I don’t know how much I’m going to invest, how can I know if I’ll get a return?

How long it takes for the company to receive the resources spent on the project can generate another problem: will the company have cash flow to support this period?

To reduce these risks, greater company planning and the use of business analysis techniques and tools, customer understanding and financial modeling of projects are required.

4C provides a simple and powerful tool that can help you increase your assertiveness and reduce risks at this critical moment. You can contact us using the form below or by email at contato@4ci.com.br