Every Entrepreneur asks this question: How do I increase the profitability or the cash flow of my business?
Cash flow management is one of the biggest issues business owners face and in the current economic climate. It is Now, more critical than ever.
Expand The Business to Expand The Network and Expand The Revenue
Cash Flow begins with getting the cash into the system. How many dollars do you have coming in, that you can deploy to turn over again and again? That’s the major juice of this article on cash flow. Have you ever heard stuff like “There are riches in the niches” or “Focus on one thing”?
On the other hand, experts are of the opinion that expanding your business will help expand your network and your revenue. There’s no harm in testing new grounds or trying out other things. You can always eliminate what does not work and retain what works, right?
So, what are these key 7 strategies for increasing your cash-flow?
#1: Reduce Your Spending
Decreasing your spending is the easiest and instant way to increase your small business cash flow. This will avail you the cashflow that your business needs to purchase equipment, stock or inventory, tools, systems and processes.
So, how do you implement the strategy of decreasing your spending to help increase cash flow?
Carefully Analyze All Your Business Spending:
How much are you offering to suppliers and do you audit your bills every month? For instance, if you shut off the lights at the end of the day or open up the windows during the day to have natural light instead, you will be able to save something substantial on the electric bill monthly in the long run.
Other areas of spending to analyze include your insurance. It’s important for small business owners to look into their insurances once a month or quarterly. These include your car insurance, your homeowner’s insurance, and your rental insurance if your building is rented. After analyzing all these spending, you should critically look at areas to reduce.
Approach Spending Analysis and Cuts Carefully
Here’s a caution though: Don’t get carried away or absorbed into your spending analysis that you lose sight and track of revenue generation. And, as you look into areas to cut costs, don’t overdo it. For instance, over-cutting a star employee's salary can drive your valuable employee away.
The message is simple – approach spending cuts carefully. But really, it’s important to schedule and carry out an audit of your business from time to time, it helps you stay in control of things.
Do you know there could be a 6 to 10 dollar difference between sending documents via DHL versus Fedex? And, if you add up the difference in a year, that will be meaningful savings on sending documents! That’s a perfect example. So, you can really save huge ultimately from here and there, as long as you find time to audit your business spending.
#2: Extend Discounts for Fast Payments
Also, to boost cash flow as an entrepreneur or solopreneur, you can call up customers that owe you and offer discounts, so that they can pay faster. The discount doesn’t have to be huge, but customers would appreciate the little savings that will accrue from it.
Create Different Debt Payment Plans and Options
And, one of the ways to reach more customers and clients with the discount offer strategy is to try several payment plans with different discount levels. You can offer different payment options. For instance, some people would like to pay it all upfront, in that case, you give them a higher discount. You can also have an option where those who need more time to make payments periodically will get less discount.
#3: Watch Your Inventory
Are you investing a large portion of your cashflow in inventory? So, keep an eye on your inventory, so that you do not buy too much or buy too little. For instance, if you want to buy inventory for the Christmas season or other special seasons, you can make your order about two months ahead of time, to help you get a good discount and free up money for cashflow in the meantime.
No doubt, inventory is the lifeline of your small business, but do not let it destroy your cash flow. Don’t let the boxes of items you sell such as clothes and candles sit in warehouses for a very long time. The message is clear – find a balance between having enough inventories to satisfy customers’ needs and having too much.
#4: Raise Your Prices
Are you keeping up with inflation? You may be able to raise prices on your services or products to keep up with the market. So, if you have ten clients, you can shrink it into five but double the pricing. Now, any additional client is an addition of a unit of cashflow. The truth is, when you do this and see the result, you will definitely wonder why you haven’t done that a long time ago!
Pay Attention to Market Factors
But, you should pay attention to the marketplace when considering price increases. If you raise it too high and nobody buys, that won’t be good for your business either. So, the marketplace should determine the price factors.
Don’t be Scared of Raising Your Prices
The fear for many small business owners when it comes to price raise is losing customers. Definitely some customers will go. But, those who value your offer and its quality will definitely stay and may even bring others.
#5: Consider a Subscription
Do you have a large number of customers who could benefit from a monthly subscription? In essence, do you have a product or service that you can put up on a monthly subscription? For instance, if you run a Massage Outfit, you can create something like Massage Of The Month Club. This way, you can offer a monthly subscription for a massage to your clients. This helps to boost cash flow.
So, when it comes to creating a monthly subscription strategy, you can have a plan where customers or clients can;
- Use or lose it
- Transfer it (transferrable)
- The less fine print the better
An added advantage of employing the subscription method is that it complements the price raise strategy. Including a monthly subscription with a price raise can help lure and retain as many customers as possible. You can use a Facebook group as your subscription service and have clients pay through paypal and other trusted online payment platforms.
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#6: Bolt on Programs
This strategy is the easiest one for most businesses. This basically means other companies or third party companies will do all the work. Your own part is to do the following;
- Join
- Promote
- Earn
The most important factor is to ensure your customers can gain value from such bolt on programs. For instance, if you run a business financing service, you can refer a potential client with bad credit score/history to a credit repair bolt on program that you’ve been a partner with, so that they will help repair the client’s credit before you can advance a loan to the individual. This helps you generate business from the client, as well as earn some revenue for referring the individual to the credit repair bolt on program.
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This bolt on program is really cool because it helps save time and/or generate some income.
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#7: Offer Prepayment Rewards
You can offer a variety of rewards ranging from discounts to extra products. Consider making a Special Rewards Program with items such as gift cards. For instance, if a customer buys a product or pays for a service before a specific day, you can send the customer a cool gift as a way to say Thank You!
By the way, the Bolt On Program is a good complement to the prepayment rewards strategy. So, what this strategy does is to give you the ability to get a hold of the customers’ cash earlier.
Create Extra Rewards for Bigger Payments
You can create a prepayment rewards option where customers and clients who prepay for large packages, multiple items or services can get extra rewards. This is a great strategy to not only increase cash flow, but also retain customers.
Here’s a final tip: Adopt most of these strategies into your business operations and find out what works best for you.
