When we are working with small business owners on improving their profit and cash position, they are often expecting us to identify some big area where improvements are clearly needed. Sometimes that is the case, but more often we will be recommending a number of small changes which add up to the needed improvement. The following are 5 areas where we are often able to make a little change.
1. Sales: Implement one new sales and/or marketing strategy. If your business is dependent upon networking, then attend 1 more networking event each week. If you have employees, ask everyone to attend 1 networking event each month where they are focused on generating leads. If your business is dependent upon sales calls, commit to making 1 more sales calls every day. That may take only 10 minutes per day, but adds up to a total of 20 more sales calls per month.
2. Cost of Goods Sold: Shop for alternate vendors. Evaluate order frequency and quantity for volume discounts. Evaluate the product to see if there is any component that does not add value to the customer and reduce your product cost by removing it.
3. Technology: Spend some time analyzing the costs/benefits of the ever-changing technologies available today. Frequently the ROI is quite high even in the short-run in terms of improved efficiency which can be translated into reduced costs, or better customer service, potentially higher capacity and even improved sales.
4. Other Expenses: Nothing should be sacred in terms of business expenses. Look at each line on your P/L and make sure that every dollar being spent is done with a forethought. Renegotiate rents. Get alternate quotes on insurance. Look to paperless alternatives for record-keeping and billing to reduce office supply costs.
5. Track Performance Metrics: Every business should be tracking non-financial performance metrics in addition to the bottom line. Evaluate each different advertising and customer relations tactic to verify that it is producing results. Track the hours spent on various activities to be sure that you and your employees are focusing efforts on enough of the income-producing or billable activities. Take surveys to be sure that what you are offering really has value to the customer.
A small company may already perceive itself to be running lean, but is still able to make a number of small changes to improve the cash flow and cash position.