You need to understand your cash flow well
There’s always a difference between the amount of cash available at the beginning of a period (opening balance) and the amount at the end of that period (closing balance). You need to be fully aware what can increase your Cash flow. Is it selling more goods or services? Selling an asset? Reducing costs? Increasing the selling price or taking a loan? Different businesses need different solutions you need to find what works for you.
Do you have enough capital that could be used in the day-to-day trading operations for a long period of time?
This will cushion you just in case payments from your clients come in later than expected. In addition to this for a new business to start making profits, it will take time so you need to have enough capital to sustain you during this period.
There are times a ‘trade off’ will come in really handy.
A trade-off is a situation that involves losing something in return of gaining another. For instance, there are times you may need to pay your supplier more for them to provide you with supplies for 90 days instead of 60 days probably because your clients have not paid you this month and business has to go on.
Can your pricing meet fixed costs?
There are always this expenses that have to be paid by a company constantly regardless of the goods produced or profits made. It could be rent, salaries or even transportation. Your pricing has to capture them regardless of any economic effects.
Be as lean as possible
Don’t run to employ too many people at the beginning or when your business is still young.If you have a number of different skill sets that your business needs, work with that for awhile.
You need to be aware of the difference between a product’s selling price and its cost of production.
This will highly contribute to how you price your product.
Most businesses want to work with big clients from chains of stores or any organisation known for huge businesses.The advantage is getting a big cheque from one client vis a vie the same amount coming from five small companies.
But how are you planning to handle payments that take too long yet you need the money to improve your business? Bigger organisations take more time to pay than smaller ones.So you need to know how you’ll cushion your business from late payments.
You can increase your sales by pitching to potential customers constantly. Talk to them about the potential in your product or how your services can improve their lives.
You don’t have to work on credit you can work ask for a deposit instead.
This article was written by Capital Campus Correspondent Evon Mercy Vala.