This week’s Entrepreneur University comes courtesy of Casey Gollan. Casey offers Business Coaching & Mentoring Programs and products for extraordinary business growth. Since 1996 Casey has to added hundreds of millions of dollars to businesses.
Today Casey shares with us his advice on how small business owners can increase their cashflow:
“Cashflow Idea No. 1. Use ‘cashflow’ sales checklists.
For sales people, get them to ask every single customer to make another ‘add-on’ purchase with the one they’ve already made. A great way to do this is to have a shopping ‘checklist’ of what the customer could buy.
Cashflow Idea No. 2. Use ‘cashflow’ payment checklists.
For your administration team. Have a checklist of your customers and when their payments are due. Set up reminder e-mails/sms’s/and faxes for each customer to ensure their payment is received on time.
Cashflow Idea No. 3. Increase your prices.
Increase your prices and you may notice a couple of things. Firstly, ‘nothing’ may happen! That’s the ideal. Secondly you may lose a couple of customers, but they’ll typically be the ‘hard’ ones to deal with. If you increase your prices by 5 or even 10% across the board you’ve got heaps more profitability and more cashflow.
Cashflow Idea No. 4. Invite your past Customers to buy from you again.
Collect your customers details and then regularly invite them back to your business. There are many ways you can do this. You can make them an offer, have a ‘closed door’ sale, a new season VIP sale night, send them a monthly newsletter, telemarket them or let them know you’ve got a gift waiting for them when they call back.
Cashflow Idea No. 5. Change your trading terms.
Good cashflow is all about getting your money in as quick as you can, and paying it out as slow as you can. So change your trading terms to get your sales income in as quick as possible. If you’re at 30 days, change it to 14, 7 or even COD. The quicker your terms, the better your cashflow.
Cashflow Idea No. 6. Pay out slowly.
The other part of having good cashflow is paying out your suppliers ‘slowly’. Do it slowly, but keep a good relationship with your suppliers. So find out when is ‘acceptable’ for them. Currently, you may be paying on 30 days. Yet they may accept 45 or 60. If that’s the case you’ll have another 15 to 30 days to use the money.
Also consider paying on your credit cards. That way you’ll get an extra 30 to 55 days interest free. And if you have a ‘frequent flyer’ rewards system on your cards you can accumulate points faster.
Ideally try and follow the 7/60 rule. Have your money come in within 7 days, and pay your bills around 60 days.
Cashflow Idea No. 7. Accept only ‘good’ customers.
In light of the previous two points, only deal with customers that will gladly follow your trading terms. You may not like turning your back on some ‘slow’ customers, but it’s worth it when you get all ‘fast’ paying customers.
Cashflow Idea No. 8. Use only profitable marketing.
Try, test and measure all of your marketing. Financially analyse each marketing campaign so that you know it’s making a profit or a loss. Then use only the profitable ones. You’ll probably find that you’re wasting money on some marketing that isn’t bringing you in any money.
If you’re not marketing, start testing some small ads/flyers/e-mails and keep going until you find something that works, with an offer that works in an ad that works. If you’re already advertising, test your headline, test other offers, test other mediums.
Cashflow Idea No. 9. Get someone else to endorse you
If you want a lot of business quickly, you could find someone with a database that’s full of people who suit your target market. Then organise with them a relationship whereby you both end up winning and have them endorse you to their database. You may do the same for them, as did a hairdresser and a gymnasium, or a restaurant and a menswear shop.
These 9 ideas can increase your cashflow, and thereby increase your small business growth. So take each idea over the next 9 days and try each one in your business.”
Have you tried any of these techniques? What have you done to increase your cashflow?
Good points Casey.
Your point on pricing while being a good one can end up chasing customers away and then you have negative cash flow.
Implemeting price increases requires more work than simply putting up the price. There are procedures you can use where you focus on things other than the price increase so that the customer is not confronted with a price increase but instead the unbeleivable added value that you are bringing to them
Casey,
You have some excellent advice here. However, what sort of suggestions would you have for small business owners? It seems this process is best for businesses who already have a large customer base. I think it would be quite interesting to see how you would tweak your advice for small business entrepreneurs, and would also attract a large readership. I know Susan Friedmann is trying to do just that with her website, richesinniches.com, and it always helps to have advice from other experts in the field.
That is some bad advice that can hurt business and relations with both clients and suppliers. You speak of keeping only “good” clients and above it about paying your suppliers slowly. If supplier applies your theory that would make you a “bad” client in their mind.
Also increasing the prices randomly, without researching the market or buying power of the targeted group ends up often in loss of clients and thus negative cashflow.