When you start a business, dreams are fresh, and you feel like you can take on the world. However, as time passes things may not go as you thought they would. Sales are down, leads sparse, and money isn’t flowing in regularly. Unfortunately, this is why so many businesses fail in the first few years, if not sooner. Fortunately, there are steps to take to boost a struggling business. Let’s take a look at some simple things you can do right away.
Plan Your Cash Flow
We can spend a lot of time pleasing clients and customers. However, what happens when that client pays late? Yeah, our business suffers. Fortunately, this can be prevented with a little pre-planning and the right tools. Planning your cash flow involves several things. First, having a quality, legal contract in place with all clients, vendors, and other colleagues is imperative. You must spell out exactly how you want to pay and be paid and when.
Secondly, I recommend adopting an invoice system that applies to your specific type of business. Set up an automated system so that customers and clients receive reminders of current and/or past due invoices. You should be able to see, at a quick glance, what money is owed to you. In turn, this will help you to plan your outgoing bills and budget. For larger invoices, consider using invoice financing companies to help you with cash flow now.
Cutting your costs is a fast way to boost a struggling business. After all, it’s in your control. The first thing to do is to cut all discretionary spending. This may mean making some sacrifices like company outings, dinners, conferences, company cars, and office extras. It might sting a bit at first but will help ease a cash-flow problem immediately.
Other expenses you could possibly cut are rent costs, utilities, and services. Talk to your landlord, vendors, and service providers to see if there is anything you could change to lower costs. You may not have much wiggle room in any of these areas, but every little bit helps.
Lastly, once you address these issues, you still may need to reduce labor costs. This is never easy, but you have to remember that your business is at stake. Talk to your employees about a temporary reduction of hours or pay cut. Have a detailed financial plan ready, so they understand what’s happening. Be honest and share your desire to be fair but also keep the business going.
Price Your Products and Services Appropriately
When things start going down, it’s tempting to have a price cut or big sale to generate sales. While this might be a temporary way to bring in fast cash, it won’t serve a business in the long run. Make sure that your pricing is comparable but also reflects the value you bring with your experience and uniqueness. Underselling yourself and your goods is a common mistake made by new owners. This has something to do with confidence and experience.
Furthermore, you need to know, at all times, what your products and services cost you. This may sound complicated, but it isn’t with the right formula and tools. This is what they call a positive variable contribution. If you find situations where there are negative variable contributions, you have to increase the price of the product and reduce the cost of making it. If you’re not able to do this, stop offering that product.