Maintaining steady cash flow is arguably the biggest challenge facing start-up business owners today. The problem is that many new entrepreneurs place other goals ahead of sustainability. While it’s essential to spend time developing your brand and generating sales, it’s downright crucial to cultivate a steady stream of cash flow, or else your business won’t live long enough to be concerned about those other things.
Here are five effective ways to keep cash flowing into your business.
1. Re-evaluate pricing
It’s common for young business owners to set prices below the industry standard to attract new customers. If your cash flow starts to suffer, however, you could be selling your products for too little. Don’t let the fear of low sales stop you from pushing higher. Test things out to determine what the market can bear, and find the margin that will help you boost your cash flow while maintaining steady sales.
2. Re-negotiate contracts
When you’ve been with a supplier for a while and have established rapport, you can approach them with a new, efficient arrangement. Many companies will consider hearing you out if they know they’ll keep you as a customer for the long haul.
Even if your supplier won’t be willing to re-do the contract, contacting them may lead you to discover you have extras you no longer need. You can improve cash flow by canceling such services.
3. Incentives and penalties
Invoicing is often a painful process that requires a lot of back and forth. You can, therefore, encourage your clients to pay in time with an incentive and penalty program.
For instance, you could apply discounts to any books cleared early or on time, and add interest to debts that have gone unpaid for too long. This way, not only will you improve your cash flow, but you’ll also save on the time and resources of tracking invoices.
If you’re having cash-flow trouble, it’s likely that you’re not attracting enough customers. Consider improving your marketing channels by developing better ad campaigns, establishing sales and promotions, and building awareness. Better marketing will reduce your cost-per-lead, open up untapped markets and boost the lifetime value of your customers.
5. External funding
If you can’t solve your cash-flow problems from within the business, it’s perhaps time to seek finances elsewhere. Banks are usually reluctant to offer loans to small businesses, so consider alternatives like partnerships, investors, good-will donors, and crowdfunding. You can also apply for a merchant cash advance to improve your working capital.
Getting external funding may seem risky, especially when your business isn’t doing too well. Nevertheless, with proper financial planning, you can make the best use of the acquired cash and streamline your cash flow.