7 ways to increase your business cash flow
Cash flow is the lifeblood of any business, regardless of size. To keep your business healthy, maintaining a positive cash flow is essential. But that’s especially challenging if your business is on the smaller side and more susceptible to supply chain shortages or other economic headwinds in today’s climate.
To increase cash flow for your business, you may need to be scrappy, flexible, and willing to try new ideas. If you’re up for the challenge, these 7 ideas can show you how to increase your cash flow.
1. Reassess and liquidate old inventory
Now may be a good time to liquidate excess inventory or discount items that are getting old. Assess what isn’t selling and why. Are you noticing a cyclical pattern or seasonality that can help you plan for the future? In the meantime, selling items at a discount is better than having no cash coming in at all.
2. Raise prices on select items
You may be hesitant to try this option, and rightly so. Nobody wants higher prices. But you may be able to experiment with adjusting prices for a few items. As you test this strategy and monitor results, you may discover that the increases are adding incremental cash flow for your business, without hurting overall sales.
3. Offer customers a pay-over-time option
Today’s shoppers like to use several different payment methods, and a popular one known as buy now, pay later (BNPL) has also proven to boost sales and average cart sizes. Offering a BNPL option to your customers can increase e-commerce conversion rates 20-30%, according to a recent RBC Capital report. Businesses that partner with Affirm to offer pay-over-time options see up to 85% lifts in average order value (AOV) and 20% repeat purchase rates.
Adding BNPL also gives you some simple levers, like marketing pay-over-time options up-funnel, that can help lift sales volume. Or you can create 0% APR offers that help encourage more sales, not to mention help offset rising prices and offload certain inventory faster.
4. Reduce unnecessary expenses
This sounds simple, but it may involve a thorough assessment of your operations, your vendor agreements, employee perks, and more. The logic of this step is easier to understand: The less money you have going out means you’ll have more cash flowing in.
5. Focus on customer retention
Usually it’s more expensive to acquire new customers than it is to keep existing ones. And customers who make a repeat purchase are easier to sell to and are more likely to buy from you multiple times. The upside presents a cash flow booster you can’t ignore.
As a general rule, 20% of customers will bring in 80% of your revenue. So, make sure to identify those top 20% and why they buy from you, and then focus marketing efforts on attracting similar customers.
6. Encourage customers to buy more
Be strategic in how you bundle complementary products and encourage add-on sales. Displaying curated bundles on your site can quickly show shoppers what an ideal combination of products looks like and reduce marketing costs. Or you could serve up related products with a reminder like “people who bought this item also bought xyz,” which can increase sales with little effort. You may be able to easily create those triggers through your e-commerce platform.
This approach can also work well in conjunction with offering BNPL options, since they often increase cart sizes up to 50%.
7. Offer a subscription for your products
This is a great way to raise a steady stream of incoming cash flow. Are there products or services that you sell on a regular basis, like consultations or replacement parts or filters? Adding a subscription option to your product offerings can also keep your business relevant and nurture relationships with loyal customers.
Increasing cash flow for your business can be a meticulous process, and you may have to revise your strategies periodically. Any or all of the above ideas can help you generate more cash flow to keep your small business healthy and growing for years to come.
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