Learning how to increase your cash flow is a necessary business science to fully comprehend. It requires strategic planning followed with consistent adherence to specific tactics and procedures. Most businesses struggle to maintain a healthy cash flow, resulting in over 90% of the businesses that are launched failing within five years.
In the business world, cash is king. Your business may be looking forward to large profits in the next few months, but if your business does not have adequate cash coming in to cover your expenses during that time, you may not get a chance to realize those earnings. That’s why it’s important for all businesses to develop the right strategies to create and maintain a healthy cash flow.
“Cash flow is the lifeblood of a business and critical in its growth. Small businesses are hugely dependent on their cash flow, and must either cut costs or scramble to find alternative funding when they are not being paid on time. With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.” – SBA.gov
As cash flow can make or break a business, it is important to develop a strategy to increase your cash flow as fast as humanly possible. While this may sound obvious, in actual fact most SMB’s do not have a clear-cut, written plan to accomplish this seemingly obvious objective. Borrowing can be prohibitive to many, plus plowing your business or yourself into further debt is not something I ever encourage. Having a business plan in place is a must if your are to establish how to increase your cash flow.
How To Increase Your Cash Flow In Business
There are 5 major tactics that a SMB owner must employ on a routine basis to build and maintain a healthy cash flow. They are listed in priority:
1. Generate More Customers. Again, this is obvious. But ask yourself or anyone else in business if they know how to proactively and routinely generate more customers with certainty. Most do not. This is the number one method on how to increase your cash flow in business. You must know where your customers are coming from, what they are buying and how to reach and covert even more of them.
Tactical Plan: Conduct an analysis on how your past customers were acquired. You want to be specific on any and all contributing factors. As well, conduct a survey of existing clients on what they like most about your brand, as well as suggestions on how to improve it. Between your analysis and surveying, you should be able to spark some ideas on how to acquire even more customers.
2. Generate Better Customers. While this sounds much like the first point, realize that not all customers purchase like the others. I know a cafe that generates 90% of their traffic in the morning, selling $3.00 coffees. During lunch, where typically one would spend 500% more, the place is relatively empty. The “better customer” in this case is the one who specifically comes in for, or returns again after coffee, for lunch. Any business that wants to know how to increase their cash flow must understand how to find and acquire the type of customer that will spend much more than the average customer.
Tactical Plan: The research in point number one above should also determine who are your best customers. Again, know from which channels or media that they originated from, as well as they motives to purchase and what desires they want fulfilled. Search for the best methods to find and acquire that specific type of buyer.
3. Become More Efficient. A better organized business will always improve their cash flow. Once the business is generating more customers, as the most important action to increase cash flow, the next action to take is to increase efficiency. This involves better training for your staff, regulating and managing your receivables in a more timely manner, as well as managing inventory and other crucial business processes. Fast, efficient businesses make more money and increase cash flow.
Tactical Plan: Hire a team building specialist who train the staff, as well as developing business processes that will increase efficiency. Many times, you may simply need to embrace new technology, such as keeping all your records on a cloud based platform. Technology can play a vital role in how you increase your cash flow in business.
4. Elevate Your Customer Service into Hospitality. “Better” customer service is no longer acceptable. In fact, it’s passe. You need to render genuine hospitality. To increase revenue, generate awesome word of mouth, retain your best customers for life and to see your positive online reviews grow exponentially, you need to become remarkable. Hospitality is genuine, warm, personable, and goes way beyond what is expected. People expect great customer service as a norm these days. You will be remarkable when you render hospitality. This is key point to address and will increase your cash flow.
Tactical Plan: Train your staff in skill sets centering around communication, superior manners and how to best interact with people. Issue company policies and training programs to develop these as good habits.
5. Reduce Unproductive Expenses & Personnel. I leave this obvious choice for last as too often 90% of SMB owners conduct this as their first knee-jerk reaction when times get tough. Yes, reducing unproductive expenses and personnel is vitally important. Note I am using the adjective, unproductive. Some expenses, especially the ones that are increasing your cash flow, should be increased. Typically, SMB’s just slash their expenses and personnel wholesale and throw the baby out with the bathwater. This results in losing momentum, great staff, crucial alliances, as well as potentially reducing service to your custometrs. You must conduct an audit of what is making you money, who are the productive staff versus the non-productive, and then act accordingly.
Tactical Plan: Work with your CPA and an Executive Coach to review your expenses and determine which of these are absolutely vital to growing the business. Reduce, partially or completely, those expenses and personnel that are liabilities to your cash flow.
How To Increase Your Cash Flow: Where to Begin
Change begins with a decision and goes forward with a well-crafted plan, of which is centered upon the purpose to achieve a clearly stated objective. You need to write a plan that includes the above 5 points. Your plan may take weeks, months or even a year to fully complete. But if you are always working with the purpose to increase your cash flow, your actions will now align and propel you to that goal. Knowing how to increase your cash flow may not come to your immediately, but how will you change it if you never begin?