Novice entrepreneurs quickly learn the depth of truth behind the old saying: “It takes money to make money.”
Beyond profit, cash flow is king in business. It’s therefore vital for businesses to establish cash flow as quickly as possible during their first year of operation.
These practical tips will help you to generate cash flow and a customer list that will serve as a foundation for repeat business.
1. Primary service or product:
One of the easiest ways to boost cash flow and profit is to drive your customers to your bestselling (or primary) product that has the highest profit margin.
2. Deposits or pre-paid contracts:
If you are in a service business, deposits are a great way to generate cash flow upfront. But you need to deliver on the back end, or you won’t be in business for long.
If you have a product-based business, you could also do the same with pre-orders, with a percentage of the final sales price going to secure the order or a certain delivered-by date. Get creative. There are endless possibilities in making this model work for you.
3. Periodic ‘closed-door sales’ for new customers or loyal customers:
Literally create a captive audience for your product or service. Set it up as a workshop or demonstration in an environment you can control and with a sales and pricing process you can direct.
For this event, ’sale‘ doesn’t need to mean ’discount.‘ An exclusive, limited-time purchasing period for new and loyal customers is an incentive for them to get the latest, greatest or most innovative products before everyone else.
4. Shorter payment windows:
You could combine upfront payments with shorter terms. It’s best to position the shorter terms as an offer with something to act as an incentive for paying early, like a small discount.
A better option is a small gift or other kind of added-value offer. You could also position this as both a thank you and an incentive to keep customers consistent with shortened terms.
5. Loyalty programmes price:
Establish a loyalty programme and add enough value so you can charge a nominal joining fee of around R25. While there may be some initial costs upfront for producing loyalty cards or customer tracking, the extra cash generated over time ends up going straight to the bottom line.
Not only can you create a highly targeted list of better qualified customers, but this is a simple way to easily generate cash quickly just by asking for it.
6. Don’t discount:
Rather offer additional incentives such as free home delivery to assist you in closing the sale. Focus the customer on the benefits and quality of your product, not the price. Don’t be afraid to lose the sale. That way you will attract only A and B grade customers.
The key is to test and measure what does and doesn’t work because no strategy will work perfectly for you every time.
If you market correctly and measure everything you do, keeping your winning strategies and killing your losing ones, you’ll eventually find your cash flow ‘sweet spot’, which will lead to larger profits, increased cash flow and a more successful business over time.
Creating repeat business
Test everything you do to ensure you’re controlling costs and meeting customer needs.