7 Ways To Increase The Cash Flow To Your Business
The first couple of years in a startup are often the hardest. Trying to establish yourself in the market requires you to spend more money producing, operating, and marketing than you take in. Many entrepreneurs believe that increasing sales is a panacea for all difficulties related to cash flow. But this is rarely the case.
A new book, entitled Scaling Up, offers insight into ways entrepreneurs and managers can address cash flow problems. An article in Inc. magazine gives summary descriptions of the 7 tips presented in the book, a few of which include the manipulation of price, volume, and operating expenses.
The advice given is worth taking to heart—and mind. It is important to remember that success in business depends on a number of factors coming together in just the right way. You should never limit yourself to looking for a single cause-and-effect relation when you encounter cash flow problems. And you should never depend on a single solution to solve them. Pushing on a variety of financial and operational levers is usually the right play.
Manipulating price, for example, can have a positive effect on your cash flow. As it states in the article:
If your customer base is solid and you provide great value in the marketplace, you can increase the price of your goods and services to gain more cash. You don’t have to price gouge, but a small increase can do wonders for your cash flow.
However, this should be combined with finding creative ways of increasing volume—that is, selling more units at the same price. Indeed, doing these two things alone will start moving the finances of your business in the right direction.
The answer for many small business owners who struggle with cash flow is to borrow. This is a perfectly sound action, especially in the first year or so when you’re just getting started. However, if you are running your business purely on debt, then you are probably heading for trouble. Of course, the circumstances and nature of your business may be such that continuous borrowing is not a problem. But you should at least explore the possibility of increasing the amount of cash you have on hand by other means.
About Christopher Reid Chris was born in Washington, D.C. and lives in Britain. He works as a blogger, essayist, and novelist. His first book, Tea with Maureen, has just been published.