Four Ways To Keep Your Business Growing During a Slow Economy
By Fallon J. Rechnitz
1. Cashflow Management is Key:
Cashflow was a big concern for many during the last few years. Dwindling sales and higher operating costs wreaked havoc upon a company’s cashflow, and out-of-control spending, inefficient marketing campaigns, and the need to lower prices in order to remain competitive also directly affected cashflow. In this new economy, proper cashflow management is more important than ever before.
Spending must be carefully analyzed; review each spending option to see if there is a more viable, cost-effective solution. Examine your spending policies to see if any excessive spending can be curbed, or at least managed better to ensure less waste. Your operating costs should also be reviewed to see if there are cheaper alternatives, and inventory costs should likewise be kept under tighter control and scrutiny.
This does not necessarily mean that you should become a miser and carefully hoard each penny. But you’d be surprised how much can be saved by reviewing spending, inventory and operating costs on a consistent basis. For example, the office supply market is a competitive industry. Don’t be afraid to shop around for better prices twice a year. Shipping costs is another area of spending in which ample savings can sometimes be garnered.
Invoice management control is a central factor to a healthy cashflow. How many invoices tend to languish for the full allotted grace period before being paid? How many are paid after the required date? You may find that you need to manage your clients more closely in order to ensure payment on time.
A healthy cashflow also means cash on hand for surprise or unplanned spending, such as equipment repairs, facility renovations, or a marketing campaign.
2. Inventory Control:
During the economic crash, many retail businesses found themselves stuck with large quantities of inventory and few buyers, even when the products were offered at very reduced prices. Liquidation was a primary objective just a short while ago, yet recent studies suggest that the trend has reversed, and companies are restocking their inventory rapidly and with large quantities once more.
The economy is still rather unstable, and show businesses should take care not to restock their products in excess of what is actually needed to supply current demand. While B2B and consumer spending is rising, it is not doing so consistently. There are still occasional dips along the way. Spending too much on stock one quarter may very well cause your cash on hand to be short next quarter when sales take a downturn.
3. Growth is Good, But Don’t Bite Off More Than You Can Chew:
As companies both large and small begin to grow, a feeling of invincibility may begin to pervade the atmosphere. Over-optimism settles in like an old friend, and it seems like the slump of recent years has finally come to an end. Well, maybe so, but it pays to remain cautious and keep your optimism in check.
And if an opportunity to grow does present itself. weigh it carefully against all the factors relative the future stability of your company. Steady growth, conducted safely and with minimal risk, is of course optimal, but circumstances may not always provide for this. Growth can sometimes happen unexpectedly, and if a business is caught too unawares and unprepared to meet the new demands of more business, production and efficiency could suffer it, as well as your cashflow. In a worst case scenario, this can also lead to the downfall of a company if the reigns are taken hold of quickly.
It is important to remain true to the core fundamentals of your business: the service or products you provide, and how much profit it garners. It may be tempting to seize upon a new opportunity that may lead to future growth, but if it puts your current stability at too much risk, it may not be worth it after all. These are the options that must be considered – do you risk sacrificing your current market for a new, uncertain one, or do you bide your time, waiting for an opportunity that fits more closely with your core business?
With any type of large business decision such as this, research is especially important. Going into something blindly is a surefire way to put a strain on your cashflow, and a whole host of new problems may ensure. Impatience is often to blame for rash decisions, as an offer or opportunity that promises increased cashflow may dissuade you from taking the time to properly research it. Don’t fall into this trap. Conduct market research, and use the Internet, where ample research may be available at your disposal for free.
4. Borrowing Money:
Banks and financial institutions are much stricter these days about who, when, and how much money they’ll lend, but that doesn’t mean you shouldn’t bother trying. You may need to shop around and fill out a bit more paperwork than what used to be necessary, as well as allow the banks to examine your financials with more scrutiny, but perseverance will bring results.
It can be more time-consuming for small business to go through the process of borrowing money than larger corporations, but don’t be put off by the lengthy applications or the idea that you’ll be turned down for a loan. If your business can benefit from a cash infusion and you have the means to pay back the loan without causing too much financial hardship, then don’t be afraid to borrow the money.
For more information on how Bridge Capital can provide accelerated cash flow solutions for your business in the Suffolk and Nassau area of Long Island, NY; Please visit us at http://www.bridgecapitalsolutionscorp.com
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According to Michael Sabetta, Senior Vice President, Goldwater Bank, a family’s income and spending habits are detailed by the PCF, but does not take into account how much the family takes in or how much it pays out. However, the GCF analysis considers all sources of cash flow and all debt service related to personal debt and debt that has been personally guaranteed by business holdings or investments in a Limited Liability Company (LLC). It’s important that business cash flow represent the amount of money the family could have withdrawn, spent or transferred to their personal account. (Many bankers differ on this point)
