Two simple words can drive a small business owner crazy: cash flow. In order to be a successful business, one must master the art of cash flow. The simple formula is to bring more money in than you put out, unfortunately, this is much easier said than done. You must not only predict the seasonal flow of sales, but be prepared for any wave of business, large or small. Many businesses struggle with this, as CB Insights recently found that 29% of startup companies collapse due to financial struggles. Follow these 8 tips to ensure that your business is the most profitable that it can be:
- Choose a consumer-based business: As much as we like to look past it, the fact is that it takes money to start a company- and a significant amount of it. If you are struggling to find the funding you need to get your business off the ground, consider changing businesses before you find yourself in too deep. Selling consumer items comes down to how well you market yourself, as everyone “needs” what you are selling and it can be the easiest way to flip a profit through sales.
- Use a credit card with good benefits: A practical way to make a little extra cash with every transaction that you complete is to use a credit card that rewards you. Credit card companies often offer a cash back feature if your billings are paid on time, sometimes up to 3%. While it may seem like an insignificant percentage, as your invoices increase, so does the amount of money you get back from your credit card company.
- Read the small print: Emotion can be a dangerous factor of business acquisitions. When a large retailer approaches your business and offers a deal, it can be incredibly tempting to accept the deal without looking too far into it. However, before you sign any papers, be sure to understand and negotiate the details. How and when will you be paid? How will you manage your money while you wait on your payment?*
- Be creative with your incentives: Why should people buy your product over others? How are you going to attract a solid customer base? These questions can make or break your business. One of the best ways to offer incentive is to sponsor public events such as contests or races. You could even put on a customer appreciation event to illustrate how much your consumers mean to you.
- Collect invoices as soon as possible: The last thing you want to be doing is chasing down a customer who still owes you money for a purchase. Try to keep a net-30 and net-60 day term policy in your contracts as a minimum. Offering things such as early payment discounts can be a great way to provide incentive to your customers to pay their invoices on time or early.
- Develop a connection with your lenders: Lenders tend to be very skeptical of giving money to companies who need it. It is important to establish a relationship with a bank or other financial support long before you need it so you can secure a commitment to future loans. Lenders are generally attracted to well established inventory, equipment, and accounts receivable.
- Create a cash reserve: For small businesses, disaster can strike at any moment. Maintaining a sturdy cash reserve can be the difference between a bad month of business and filing for bankruptcy. Start with some cash in your bank account, and continue adding to it until you have enough to respond to a worst case scenario.
- Use your phone to stay involved. One of the beauties of our modern world, from a professional perspective, is that there is an app for just about anything. You can use you cell phone to stay connected to coworkers, manage your finances, and even keep up with new regarding your industry.
*Invoice factoring is a great way to get the cash you need almost immediately so that you can continue your business operations at a normal speed. At Factor Finders, we use our vast professional network to pair you with a factoring company that specializes in your particular business.