Tuesday, 14 August 2018

How to Increase Your Business Cashflow in a Struggling Economy

Over the last two months we have heard that due to the subprime issues experienced in the US, and the consequent collapse of the finance sector, the impact over the world has been the tightening up of the available funds and the shrinking of business confidence and investment.

In Perth some general retailers have experienced a reduction in sales of between 5 or 10 %. Specialty or upmarket retailers have suffered a decline in sale of up to 30 %. This is all on the back of the fuel increases, interest rate increases, the election (federal and state) and finally, the global credit meltdown, that experts are predicting is a once in a life time occurrence.

So what can we do to not only survive the imminent slowdown in demand and sales but to capitalise on the change in the business environment?

1. Review your existing fixed and variable costs

Optimise the return on your investment in the business. Every resource used in the business, should directly or indirectly, generate you sales and profit. Review your variable expenses. Supplier trading terms, shop around, investigate new technologies, review your systems, Go out to tender, give your existing suppliers “first right of refusal” but at the end of the day, get your product at a better price and on sell it to your customers in a more efficient way.

Prioritise the expense that is reviewed based on its percentage of sales. For example, in retail, the general cost of goods is between 30 and 65 %. So getting a 1 % to 5 % discount increase, will drop straight to your bottom line, into your bank account. I recently worked with a pharmacy owner and demonstrated to him that if he reviewed his wholesale trading terms and achieved a 1.25 % increase in trading term discount, this would equate to an increase in annual profit that went straight to his bank account, $ 32,500.00. For him to generate this profit by increasing sales, would require an additional $ 155,000.00 in sales!

2. Service your existing customers better

Focus on servicing your existing clients better and lock them in where possible. 76 % of business should come from your existing client base (including referrals). If you can have a contract for your service, sign them up. Provide payment options. Down size the range of products that you offer. Stick to the profitable ones. If you provide a service or product that requires ongoing serving, ensure you “lock in” the servicing schedule after the initial sale. I was coaching a client who sold coffee machines and we discussed as part of the sales process, following the initial sale of the coffee machine, locking in the:

1) supply of coffee beans based on the number of employees that the client had,

2) the after sale service and

3) the ongoing frequency of having the machines serviced for the new client and finally,

4) when to upgrade the coffee machine.

3. Advertise and plan for a return on that advertising investment

Do you know what advertising works best for you? What type of advertising is costing you money, with little or no return?, with technology changing monthly, are you aware of new innovative ways to market to your client that are cost and results affective? Make every marketing expense an investment and get a return on that investment. The only way we know if an investment in marketing gives us a return, is if we test and measure! Know your target market, know what they want, provide it too them in a way that is accessible, solves their problems and deliver more value to them. Then tell your prospect in a way that they understand, that is unique and solves their problem, reduces their pain of gives them pleasure.

You can make money as the economy grows, booms, slides and declines, provided we are understand and are analysing the point of the market that we are at… that we are open to new ideas and that we are prepared to try new things to capitalise on the changing market.

If you would like assistance in reviewing your expenses, repositioning your business in a changing market, assistance with developing your team or understanding your financials, call us at ABC Business Improvement and we will be more than happy to assist you in these challenging times.

Specialists in Perth for Business Coaching, Perth Business Development Strategies, Perth time management advice, Perth cashflow solutions, Business Profitability Perth, Perth Marketing strategies, Business Mentor Perth, Business Advice Perth, Small Business Perth,

David Buttsworth

On behalf of ABC Business Improvement

1300 BIZ BOX

0433 835 226


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