Priorities In Tough Times
John Maxwell says ‘ People are like rubber bands: They must be stretched to be effective.’
We need to look at what is happening around the world today as a challenge and an
Opportunity to improve...
The reason so many people never get anywhere in life is because, when opportunity knocks, they are out in the backyard looking for four leaf clovers.”
Walter P. Chrysler
Stop the Leaks – Improve Cashflow
Lets look at just a few practical ideas to improve cashflow RIGHT NOW
Look at your prices
Now might not be the best time to increase prices but look at how you
- Add value with better service, warranties, installation or delivery. Just returning phone calls and turning up when you say so is a big win (try getting a tree arborist to quote sometime!)
- Segment prices for better return – I often tell franchisees in older markets to have a selection of smaller (halved) slices or cake offerings at a better margin per unit since their customers are often tempted to buy smaller portions.
- Educate on value rather than price - train your sales staff well on product value and attributes
- Have unique selling propositions – eg. For food products, coffee beans etc, sampling with special introductory offers and accompanying coffee knowledge, leaflets etc, always works well
- Look at some exclusive lines no-one else can offer
- Change some of your products or packaging to create interest & re-price. Price low and you will be seen as cheap, especially if considerably under other products in the market.
- Create bundles or packages of low cost items with high perceived value
Reduce your Cost of Goods
- Step one - work out the quantities you will require for say, the next two years and talk to suppliers. You should be able to negotiate better prices if you can provide them with consistent business.
- Look for alternative suppliers
- Aim to reduce all costs by 10%
- Buy in bulk, Pay and receive delivery over time. Most suppliers are looking for long-term orders. We did this early on at Gloria Jean’s Coffees to get bulk discount rates and also to help our warehousing space by receiving (and paying) over time.
- Increase speed of operation. One company we know has improved cash flow considerably by reducing production/ delivery times (it took a staff alteration to do this!)
- Sell stock.
- Give aways – eg. buy one get one free, or half price; Bundle items together at special discount price or give all customers something free when they purchase or visit.
- Try before you buy, samples, free trial periods etc.
- Promotions – local ads, radio, letterbox drops, shopper dockets, direct mail, deals with other businesses, movie theatres, etc.
- Improve inventory accuracy – do regular stocktakes so you know what to order, what sells & what is rubbish.
- Reduce your inventory. Look at ways to get rid of old slow moving stock – get to it early before it becomes unsaleable.
- Replenish based on market demand.
- Get rid of excess storage area. Retail stock in the back room isn’t seen & won’t sell! I often ask retailers have they opened their store room to customers since this is where they keep everything.
- Look at your terms. Change them to cash terms rather than sending an invoice or reduce from 30 to 7 day terms.
- Increase the price on payment over 7 days, 14 days etc.
- Overcome your fear of collection – make sure whoever does this job is polite but firm and persistent.
- Have a defined collection phone procedure.
- Have a reliable system to track accounts and keep it up to date.
- Have your staff trained on collection tips & techniques
- Visit your customer.
- Suggest an alternative where there is difficulty – better to get slower payment than none at all, it all helps the cashflow.
- Be aware and educate yourself - Worst case scenarios I won’t go into but there can be a need for debt collectors, lawyers etc.
- Automate your payment system and pay as accounts are due
- Extend your accounts payable period
- Try before you buy
- Where possible only pay when sold
- Pay the minimum
- Introduce a card for bonus points/55 days interest free or points that can be used for travel.
- Get deposits
- Progress payments in advance – similar to the old lay by system.
- Telemarket existing customers - call to see how the product/service is performing. Offer updated add ons / replacement or special customer prices.
- Arrange easy finance.
- Sell your system (or product) in other territories.
- Events to highlight the product – anything will do as an excuse: birthdays, 1,000,000th customer, local events, seasonal celebrations, new or revamped premises, under new management or new owner - even a party just for the sake of it!
- Look for free advertising & PR stories to give local media. Provide product or services as prizes for local media to run a promotion.
- Accept all credit cards and EFTPOS. This is one many smaller businesses need to heed! A sign that says Cash only these days will definitely drive people away and/or result in small item sales only.
- Accept cheques.
- Up-sell, customers who are ready to purchase, or who have got a bargain will often be happy to buy more.
- Cross-sell or add on sales. One of our franchisees increased his weekly sales by $3,500 simply by offering a small $1.95 add-on food item to each customer, increasing average transactions from $4.05 to $5.05.
- VIP or club membership with special benefits
- Sell add-on warranties or contracts
- Have a 1800 Phone number and a well trained receptionist
- Website – keep it up to date and helpful, easy to find and negotiate. Look at utilizing it more eg. with special website deals