For the past 26 years, Raj Mehta of Infosys International has relied on the public sector for the bulk of his revenues.
That business model worked up until the recession, which forced him to rethink his strategy.
Mehta, chief executive of the Plainview-based information technology solutions provider, says he's seen his payment cycles from core clients, largely government entities, more than double since the downturn began. That has put a strain on cash flow at times.
"The average is at least three to four months to get paid and that depends upon the agency," says Mehta, 56, noting it used to be 30 to 45 days. "Some are much longer than that."
About 80 percent of Infosys' business is from federal, state and local government entities, a dynamic he hopes to shift by adding more private pay clients to better balance the business' cash flow.
That's a smart move, particularly in this economy, say experts.
"I don't think more than 50 percent of your business should be reliant on one sector or industry," says Denise O'Berry, a Tampa, Fla.-based small business expert and author of "Small Business Cash Flow" (Wiley; $29.95).
New clients, pay deals key
The down economy has extended payment cycles across various industries and sectors, says O'Berry, noting government entities "aren't the fastest paying" to begin with, particularly with all the bureaucratic layers and declining tax revenues as a result of the downturn.
As companies look to manage cash flow, they should diversify their client base and create agreements where they receive some kind of upfront initial payment and then milestone payments along the way, says O'Berry. They should also cut costs and renegotiate contracts to free up cash, she adds.
Mehta renegotiated several key contracts early on, including Internet and phone service, resulting in at least 10 percent cost savings. He also introduced new products and services to expand his customer base, particularly in the cloud-based and mobile computing areas.
Last year, Infosys became a system integrator for a digital pen technology that eliminates the need for manual data entry and scanning by importing data off a form or document directly into a user's computer system. For example, if a patient fills out a form in a doctor's office, the digital pen would import the data directly into the office database.
"We're targeting the health care and legal sectors," says Mehta, who emigrated from India to the United States in 1978 with $6 in his pocket.
The company also has created a mobile app to help school districts comply with the new statewide teacher evaluation system/annual professional performance review, says Mehta. It allows administrators to perform the evaluations on a mobile platform, such as on an iPad.
Infosys is already working with Hempstead schools to digitize the district's evaluation forms via a custom mobile app.
"It saves time and streamlines processes," explains Carlos Ramirez, director of technology for Hempstead public schools.
Mehta says he's building on that technology and working on creating more mobile apps for the private sector. He has signed some new clients and added staff, aiming to grow private-sector business to at least 40 percent of revenue.
And he continues to network within local business groups such as the Long Island Forum for Technology. Mehta is developing a website for LIFT to showcase local businesses for government procurement opportunities in the surface transportation and security sectors, says LIFT executive director Bill Wahlig.
Mehta says his efforts have resulted in "double-digit increases" in annual revenue since 2010 despite the slower- paying clients. He didn't disclose figures.
"Experience always teaches you lessons, and we've learned our lessons in multiple economic downturn cycles," he notes. "We've become stronger because of it."