As a result of the credit crunch, banks have pretty much shut up shop in terms of business lending to both small and medium sized businesses. Lack of lending can mean you’re unable to grow your business as quickly as you would like.
Financially speaking, there are two places where you can improve cashflow and find efficiencies in your business:
- Your Profit & Loss
- Your Balance Sheet
Profit & Loss
How to grow your business by improving sales
Look at what you are selling and determine which ones are making money and which aren’t. If you want to grow, you need to grow the profitable lines. It’s the old 80/20 rule – concentrate on the 20% of customers, products and services that provide 80% of your profits.
Internet marketing can be much more cost effective than traditional forms of marketing. Remember you want qualified traffic, not just traffic, so be specific about how you attract your visitors.
How to grow your business by reducing costs
Look at what products and services you are buying and spend some time investigating and negotiating better deals and more efficient ways of delivering.
Don’t underestimate your value as a customer and don’t be afraid to shop around for other suppliers.
You should also look at your overheads as this is an area where you can make massive savings. Do a review of all overheads and ask:
- Why am I spending this and what ‘value’ does it deliver onto the bottom line? Should I cut it out?
- How could I do this differently to achieve a similar result?
- Who else could deliver this product or service and how much would they charge?
Want more articles like this? Check out the financial management section.
You need to chase outstanding customer accounts as the rewards you’ll get from receiving the extra funds will make your efforts worthwhile. Once you get into the habit of ensuring customers pay on time you will need to borrow far fewer funds to run and grow your business.
Conversely, as the business owner you should have very tight control over payments to suppliers. I have seen this time and time again – business owners pay the bills faster than they need to. This puts unnecessary stress on cashflow.
If you deal in products, watch your stock levels. Try to think of stock as hundred dollar bills sitting on your stock room floor. You need to know your stock usage patterns and set a program for purchasing stock.
See if there’s a way of speeding up work in progress. The aim is to get jobs finished as quickly as possible so that you can invoice customers and get paid. If you can get a deposit to cover costs, this is a great place to begin injecting cash into your business. Progress payments are also a great way to ease the cashflow burden.
A job management system may seem like an expense, but once installed into your business you have it forever, creating efficiencies and improved cashflow.
If you can implement the above improvements in your business the level of money ‘freed up’ to grow your business may mean you never have to go cap in hand to the bank again!