By Mike Smith
Day-to-day business operations can place considerable demands on an entrepreneur’s time and energy, particularly when he or she works alone or in a small team. Sometimes it’s hard to find the time to take a step back and review current business performance and consider the factors that will determine future business performance. But just like doctors perform checkups on patients to monitor their health, entrepreneurs need to learn to take the time to read their company’s vital signs through a business health check – revenue, profitability and cash flow – to make sure it gets a clean bill of health and to improve the chances of preventing future problems.
Identify New Revenue Streams
Whether you’re aiming to capitalize on existing revenue for a greater market share or trying to go in a completely new direction, it’s always useful to review the various products or services that you offer. First, you need to call a meeting of your sales and marketing people to ask them if they think the company is focused on the right products or services. Invite them to share where they think the industry is heading and if the business is positioned to take maximum advantage of the changing landscape ahead. Put simply, give employees the opportunity to offer ideas on how you can further monetize your core revenue streams or to come up with new sources of income.
Employee feedback is vital as is listening to existing and potential customers as this is how you will identify new directions for your business. That said, before taking the plunge, it’s important to test and retest before committing to a new product or service. Let the people who believe in the new idea take ownership of it and see if they can make it work. Finding new areas of income for your business not only beats economic downturns, but also helps to motivate and retain employees.
There are many reasons why entrepreneurs are willing to take a calculated risk and set up a business. For instance, some want to make a profit, some want a new challenge or the satisfaction that comes with starting a successful business and being independent, while others want to make a difference by offering a product or service to the community. Whatever the reason, one thing that all businesses have in common the aim of being profitable. Profit is crucial to a business’ sustainability and is also an indicator of business success.
One way to increase your profit margin immediately is to consider ways of lowering your overhead expenses. This can be done by scrutinizing the base expenses and removing non-strategic expenses that just don’t add value to the company or customer. Also look at making buying from the company as easy and simple as possible by reducing the barriers to entry. It’s important to reduce frustrations and remove all hurdles to repurchase.
Manage Cash Flow Effectively
Cash flow is critical for the success of a small or medium-sized business. Many profitable businesses on paper wind up in bankruptcy because the amount of incoming and outgoing cash don’t compare. Companies that don’t manage cash flow well may not be able to make investments needed to compete or may have to take out a loan to cover their day-to-day operations.
Securing a steady stream of income is essential for business operations to run smoothly and this can be achieved in a number of ways. Accounts receivable financing can be a practical solution that uses customers’ outstanding invoices as collateral in a financing agreement. The financing companies typically advance 70% to 90% of the value of the receivables, collect the debts and pay the company the remainder of the amount minus a fee.
This type of asset-based financing secures a predictable amount of income for the company and also frees up resources so employees can prioritize the needs of new clients instead of focusing on trying to collect bills. It’s flexible and allows companies operating in different industries to get instant access to working capital. It also transfers the risk associated with the accounts receivables to the financing company.
Once you have received a cash boost from accounts receivable financing, the money can be used to fund expansion plans, hire new or temporary employees, buy inventory, take advantage of bulk discounts and benefit from investment opportunities and prepare for seasonal demands on your business operations.
Reach New Audiences
In recent years, marketing has evolved from pushing the company’s message out to potential customers via billboards, print ads and TV commercials to attracting consumers through strategic content posted on blogs and social media sites. Today, the digital landscape continues to evolve, and the most effective marketing strategies now take an integrated approach. In other words, they ensure that all messaging and communications are consistent across all channels and, more importantly, are centered on the consumer.
You can maximize your marketing efforts, reduce the costs of finding and retaining consumers who are most likely to buy from you and ultimately increase profitability by pulling resources together into a customer-focused, integrated, transparent branding message and then distributing that message via every channel possible. That said, just focusing on online marketing tactics risks losing online personal appeal. So if you’re truly serious about connecting with consumers on a personal level you need to gain a deeper understanding of your customer and should take the following steps:
- Understand their demographics and psychographics (interests and opinions).
- Create a “persona” or working model of the typical or target customer.
- Devise surveys to gain personal insights into customers to shape your marketing strategy accordingly.
- Meet customers in person at events.
- Hire a customer to be part of your marketing team.
In short, by gaining a better understanding of your customer, the more personally appealing (and successful) your integrated marketing approach will be.