I’m sitting down with Dawn (name changed to be respectful), owner of a software company who was struggling with cash flow.
They had recently gambled on two expensive marketing initiatives that simply hadn’t panned out (one was a quadrupling of their presence at the largest trade show they exhibited at and the other was an overseas hire to help them open up sales offices in Europe.)
As a result of these two initiatives not working, they felt stretched thin cash flow-wise.
Dawn was sharing this with me at a workshop we were hosting. I could see both the fear of the situation she found herself in and the fact that she wasn’t sure how best to regroup.
I gave her my best thoughts and thankfully she turned the situation around, even growing over 10% for the year.
For any small business owner struggling to maximize cash flow tactics, you are not alone. Here are my top 6 tactics I regularly share with business coaching clients to quickly boost cash flow. These are intended more as fast-acting remedies rather than long acting cures (although items 2 and 6 can tend to be permanent fixes for many cash flow challenges.)
Tactic One: Formalized and Concerted “Reactivation” Campaign
If you’ve been in business for over two years and provided great value to your customers during that time, you should strongly consider adding a formal reactivation system to your marketing mix.
A formal reactivation campaign is a process whereby you intensely go back to those past customers or clients of yours who used to buy from you, but for one reason or another haven’t purchased from you in a while, to powerfully invite them to buy again.
Let’s look at a formal reactivation campaign we helped one of our business coaching clients, Dr. Ngyuen, create.
Dr. Ngyuen owns two successful dental clinics. Over her fifteen-year history, the practices had accumulated a large number of patients who kept putting off their regular dental examinations and cleanings. Dr. Ngyuen’s office team pulled a list of all their past patients who hadn’t been in to see them in over nine months. Then, in quiet times in the day, her office staff would spend a few hours calling these patients, using a simple script with the express goal of scheduling them to come back in to the office for a dental exam and cleaning.
The results? Of the people her team reached, 25 percent immediately reactivated and scheduled an appointment on the spot. Another 15 percent of them asked the office to call them in thirty days to schedule an appointment at that time.
The bottom line is not only did this generate thousands of dollars of service volume for Dr. Ngyuen’s practice every month, but it also helped her business fulfill its mission of caring for the oral health of their patients. Her staff has formalized this system so that it is now a staple in her office that allows her team to fill in any lulls of treatment hours so that the practice always stays full, utilizing its capacity to best effect.
Tactic Two: Raise Prices
Too many businesses price based on their costs, or even worse, they price based on their costs way back when they started their business years earlier, with small, incremental increases over the intervening years. Rarely does the average business owner sit down and fundamentally rethink his pricing model.
Do you price in relationship to your costs and your competitors?
Consider this: the most successful companies take both of these factors into consideration. They also price in relationship to the cost of the status quo for their customers.
How much is the problem that your product or service solves already costing them?
What is the real value of your product or service?
What is the “frame of reference” you could give your customers that would help them immediately see your product or service as both the logically sound and emotionally satisfying solution? The more you are able to provide your market with solutions that other companies can’t, the greater your ability to price in relationship to the true value of your solution instead of the race-to-the-bottom commoditization that so many businesses suffer from.
We had one client increase her operating profit by over 50% by increasing her pricing. So take a long, hard look at your pricing and see if you should change the way or amount your charge for your products or services.
Tactic Three: Sell More to Your Existing Clients (Up Sell, Re-Sell, and Cross Sell)
This third tactic is about finding ways to provide more value to your clients and customers by getting them to buy a larger, deeper, more involved bundle of goods or services (up sell), buying more frequently (re-sell), or buying complementary and related goods and services from you (cross sell).
For example, Kimberly owns three successful hair salons in the eastern U.S. One of the core systems in her business is her “re-sell” system that works to help her salon clients come in for beauty treatments more frequently, ideally 8-12 times per year. This adds hundreds of thousands of dollars of additional revenue to the salon (with very little marketing cost since these efforts are focused on existing clients) and her clients truly look better for it.
While taking these different opportunities to sell more, it is highly recommended to build strong relationships with your suppliers. By keeping the strong relationship with your supplier, you have a better chance of getting more favorable terms and agreements to keep your inventory flowing. This will help your small business with getting an excess inventory, saving you time and energy in the long run.
How could you use upsell, re-sell, and cross sell strategies to increase your cash flow?
Tactic Four: Build Outbound Business Development Momentum
Whether you set a specific target number of outbound calls to make each week, or meetings to set with prospects, or networking opportunities to attend, set and meet a regular weekly quota on those activities that are the best precursors to your company selling more.
The key with this tactic is to make it a habit with a clear, concrete, quantitative target and tracking that you see in front of you on a weekly basis.
Tactic Five: Create and Follow Up with Your “Hot Prospect” List
Every business has a small subsection of 5-15% of its prospects that are higher propensity buyers that deserve a dedicated follow up process focused just on them.
Yet most businesses leave all their prospects in a muddled, merged list (if they in fact have a formal list, let alone a CRM solution!)
This costs them when it comes to prioritizing follow up because they squander their limited sales resources going after their mixed list instead of going after their most substantial and highest rated prospects first.
So carve out your “hot prospect” list, and do it in a systematic way so over time your best prospects get the most and best of your company’s sales energy to help them buy from you.
Tactic Six: Collect More of What You’re Owed – Faster!
It’s my observation that most business owners are simply uncomfortable or even afraid to look clearly at their collection practices.
They bury their heads in the sand and passively wait to get paid.
Many are even afraid of upsetting clients by asking for payment and pushing it off onto their bookkeeper or another poorly equipped member of their team.
If small business owners continue to be afraid to look at their collection practices, this can initiate major cash flow problems for the future. These cash flow problems can lead to cash shortages within the business and will affect many components such as investments, inventory, payroll, revenue stream, etc. Becoming more efficient with how you are handling these billings can help offset the money you have floating on activities that might have been completed either weeks or months ago.
Take a look at your balance sheet and or run an “aged A/R” (accounts receivable) report out of your book keeping software (standard on just about every software you’re likely to be using) and see how much of your money is sitting in uncollected receivables.
Consider using formalizing and optimizing your “Collections Cycle” to speed up the pace and proportion of the money that you collect.
Remember, the only thing worse than a lack of sales is a surplus of sales that you simply don’t collect on (or collect on so slowly that it forces you into a cash crunch.)