I am often invited to entrepreneurship seminars. The organizers of such seminars usually invite me to give tutorials on matters to do with business finance. My tutorials on that particular subject tend to be well received. I have noted that the entrepreneurs tend to suddenly become alert and attentive, once they hear that a tutorial on anything to do with business finance is about to start. And at the end of the tutorials, I usually invite the entrepreneurs to raise any questions they may have. From that point, I usually get an avalanche of questions, touching on all aspects of business financing. A common thread that tends to emerge (from the questions) is where the entrepreneurs seek to know how they can improve their businesses’ finances. It soon becomes clear that most small businesses’ finances tend to be rather precarious. It soon becomes clear that most small business owners are always fighting against the risk of ‘drowning’, as far as their business finances are concerned. This is why they gladly welcome any advice to help them improve their businesses’ finances.
One easily gets the impression that the main preoccupation in the entrepreneurs’ minds is the question of how to improve their businesses’ finances’. And that is why I have chosen to deal with that particular question in today’s article: that is, the question on how you can improve your business’ finances.
Without further ado, I will now proceed to explore some of the strategies you can use to improve your business’ finances.
Improving business finances by trying to increase the revenues
One of the most straightforward ways in which you can improve your business finances is by trying to increase the revenues. Actually, in most of the cases, this is what is recommended as the first option to consider, when trying to improve business finances.
There are many specific things you can do to improve your business’ revenues. Some of them entail trying to increase your sales. To this end, you may need to improve your marketing game. You may decide to undertake an advertising campaign, in a bid to improve your sales, and consequently improve your revenues. You may also decide to improve your distribution system, in order to make your products more widely available. Once your products are more widely available, the sales are likely to go up, resulting in higher revenues for your business. You could also consider launching new product lines, especially if it is possible for you to do so using your existing equipment. The new product lines can subsequently give you new revenue streams – ultimately leading to better overall revenues for your business.
Another strategy you can use, when trying to improve your business revenues, is that of raising your prices. Of course, you have to be careful here – because at times, a price increase may lead to reduced sales, ultimately leading to lower overall (rather than higher) revenues for your business. But if you are confident that an increase in your prices won’t lead to reduced sales, then that too is a strategy you can use. It doesn’t have to be a huge price increase, by the way. You can raise your product unit price by as little as 5%. That will probably be too low for your customers to note or, you know, too low to make your customers not buy your products. But from your end, a 5% increase in product unit prices may translate into a huge boost in your business’ overall revenues.
Whatever method you use to improve your business’ revenues, chances are that higher revenues will in turn lead to an improvement in the business’ overall finances.
Improving business finances by trying to reduce the expenses
Another quite straightforward strategy you can use to improve your business finances is that of cutting expenses. Of course, you have to be careful here. If you are not careful, you could end up cutting expenses in a manner that affects the business’ overall performance. So you have to focus on only cutting the non-essential expenses. This means trying to identify the expenses that can be cut or eliminated altogether, without affecting the business’ overall performance.
Improving business finances by following up on debts
Your business could be struggling financially because it has sold too much on credit, and it has too many unpaid debts/accounts receivable. In that case, what you may need to do, to improve the business’ finances, is to put more effort in following up on the debts. Sometimes, all you have to do is to send ‘reminders’ to your business’ debtors. Sometimes, however, you have to be more directly aggressive, and possibly even involve debt recovery agencies, in a bid to get your money paid. When all is said and done, your circumstances may be such that you can improve your business’ finances vastly by simply recovering more of its debts.
Improving business finances by selling assets
Sometimes, you realize that you just have to inject some ‘fresh’ money from somewhere into your business, if at all you are to improve the business’ finances. At this point, after exploring all the potential sources of ‘fresh’ money to be injected into the business, you may come to realize that the best option is that of selling assets. This is a particularly attractive proposition if your business happens to have some redundant assets — you know, assets that it is not using. In that case, you can opt to liquidate the assets, and inject the money into the business, in order to improve the business’ financial position.
Improving business finances by borrowing
This sounds counter-intuitive. But there are times when you come to realize that, in the short run, you have to borrow money in order to improve your business’ financial position. The idea here is usually to borrow the money, then inject it into the business, to carry out activities that can subsequently improve the business’ finances. For instance, earlier on in this article, we observed that to improve your business finances, you may need to carry out an advertising campaign. You’d be carrying out the advertising campaign in order to increase sales, which would subsequently lead to better revenues and ultimately better overall finances for the business. But then, your circumstances may be such that you don’t have the money to finance the advertising campaign in the first place. That is how you’d end up having to borrow money, and then using the money to finance the advertising campaign. That, as we noted, should subsequently lead to better sales. And the better sales would lead to better revenues, and ultimately better business finances.
You can also borrow money to improve your business’ inventory, to get better equipment for your business or to repair your existing business equipment, to create new product lines… and so on. All those are things that would improve your business’ performance in various ways, hopefully leading to better business finances. So much as the idea of borrowing money to improve your business finances sounds counter-intuitive, there are circumstances where it can make a lot of sense.