Earlier this week I was speaking to one of my new clients based in the south of England.
And one of the things that came up in that conversation (which also seems to be a challenge for lots of other practices that I’m speaking to) is that their lock-up was too high.
In fact, for this client in particular, about half of their turnover (which is around the £2.8M mark) was stuck in lock-up.
Now between debtors and WIP, that’s a huge amount of money that’s just stuck in the system.
Even if your practice is smaller, and you have for example £100K or £200K stuck in lock-up, it’s still a lot of money.
Avoid falling into the comfort trap
One of the dangers here is the old comfort trap.
Practice owners will often say “yes, but my cash flow is fine so it’s not a big issue for us…”
Sure, you might be comfortable, but ask yourself this question…
What could I do if half of the money currently stuck in lock-up was in my bank account?
- You could afford to hire amazing people
- You could buy amazing systems and technology
- You could invest into marketing and growth
There are countless ways that the money could be used if it wasn’t just locked-up.
So where do you start when it comes to reducing lock-up in your practice?
The key point to understand here is that it’s not so much about the numbers and the amount that’s stuck in lock-up…
It’s more about you as a business owner, and more importantly a leader, stepping up and demanding what you will and won’t tolerate in your business and your life.
Because the truth is, reducing lock-up isn’t rocket science…
They’re just systems that need fixing:
But this is more about you drawing a line in the sand.
It’s about you making a decision to change things because you will no longer settle for how things currently are.
If you want to carry on as things are and allow money that could be invested into developing and growing your practice to be stuck in lock-up, that’s fine. But please recognise that that’s a choice only you have made.
If your lock-up is currently too high, then maybe it’s time for a decision.