The challenge that most start-up businesses have is surviving the first few yew years. You have to make enough money to stay open during that time. If not, even if you foresee a rapid increase in profits in the the future, your business may not be around long enough to witness them. This is where cash flow comes in.
You need to optimize your cash flow, which doesn’t just mean increasing your revenue (though that might be a piece of the puzzle). Rather, cutting costs, speeding up invoicing and earning interest on your various accounts are the factors that will play the biggest part in keeping your start-up business afloat.
Here are five ways you can boost the cash flow in your start-up business:
You may be concerned that your sales will suffer if you raise your price too much, but it’s best not to come to any preconceived conclusions without first testing and finding out what the market can bear.
If your pricing is too affordable, you won’t be taken seriously. But if your pricing is too expensive, you will lose some business to competitors. So, you have to recognize that a lot of margin sits in the happy middle and that your task is to find a price point that helps boost your cash flow while not resulting in lost sales.
2. Replace old equipment and inventory.
Old equipment takes up space and is always difficult to boot. For example, print devices can quickly become outdated and incompatible with the latest technology.
With many companies moving from desktops to laptops, and laptops to mobile devices, the replacement process can be frustrating. Managing, maintaining and repairing multiple brands and models is costly, since each requires its own proprietary toner or ink cartridges. In addition, your team has to be trained in usage and maintenance on each new machine .
Leasing devices, therefore, can be cost-effective, since you’ll always have the latest technology available at your fingertips, and because newer devices are more power efficient.
But whether you’re dealing with equipment or inventory, if either one is obsolete, not working or not being used, you’ll need to replace or eliminate it entirely, as it is just taking up space. In some cases, too, selling old equipment can also result in taxable gains, another way to boost cash flow.
3. Re-negotiate long-term contracts.
There may be an opportunity to re-negotiate contracts with companies with whom you have an established rapport. If you know that you’re going to be keeping those companies on over the long haul, you can approach them with a new, more cost-efficient arrangement.
Many of those businesses will be willing to work with you if they know they’ll be able to keep you as a customer for several years to come. That’s an advantage for them, since they won’t have to check in every month to see if you’re going to renew.
Not all providers will be willing to make changes to your account, but as you contact them, you may discover that you have add-ons or extras you no longer need. So, you can improve cash flow by cancelling services you aren’t using.
4. Create incentives for early payments and penalties for late payments.
If you find it difficult to keep your clients accountable and loathe having to follow up when they’re late in paying, implement an incentive and penalty program.
For instance, discounts could be applied to any account paid early or on time, and interest could be added to any invoice that has gone neglected for too long. These moves will encourage your customers or clients to get payments to you early, thus immediately improving your cash flow.
5. Improve your marketing.
Marketing is a very important key factor to better cash flow in a start-up business. This is because improving marketing reduces your cost-per-lead, boosting the lifetime value of your customers and opening up untapped markets.
Are you having trouble fostering trust and gaining credibility with your customers? It may be time to implement a content marketing initiative that educates your leads, improves your conversions and boosts your company image, especially online.
Are you interested in upselling but don’t know what products to create? Survey your customers, or have a third-party consultant conduct customer interviews to determine what your next offering should be.
Your business infrastructure needs to be monitored and tweaked regularly. This is not a set-and-forget exercise. Before you blame your customers, be willing instead to examine how you’re allocating your money, and determine what changes might be made.