Alternative Ways to Avoid the Cash Flow Crunch for Small Businesses

In my last few blog posts I’ve highlighted different ways that small business can increase their cash flow, with strategies that vary from bartering with other companies to turning away slow/no pay clients. Here’s a list of those blog posts in case you want to know more about ways to bring more cash into your small business:

3 Ways to Beat the Small Business Cash Flow Crunch
3 More Ways to Beat the Small Business Cash Flow Crunch
4 Ways to Decrease Small Business Overhead and Increase Cash
Small Business Cash Flow - Collect Early or Don’t Collect at All

In this blog post, I explore some more adventurous alternative ways that small business owners are discovering for avoiding the cash flow crunch.

Adventurous Ways to Avoid the Cash Flow Crunch
The methods I discussed in my previous blog posts are fairly common sense and standard; ask any good accountant and you’ll get some, if not all, of these suggestions. The two methods I cover in this blog post are less standard, and you may or may not have heard of them. Even if you have heard of them, you may not have considered them as viable options for you. But with the economy being the roller coaster that it is right now, you may want to keep your options open. So what are these two adventurous options?

- Factoring
- Creating Multiple Streams of Income

Here’s an overview of these two options so you can start wrapping your mind around them.

Factoring
The word “factoring” doesn’t give you much detail about this option, but it can give your business a boost if you are suffering from constipation in the cash department. With factoring, you sell your accounts receivable to a factoring company, which is usually a bank or a commercial finance company. When you sell your company’s receivables, you get cold hard cash. It is then up to the factoring company to collect cash from the clients who owe money.

The good news is that factoring is becoming more popular and more possible for small business. Previously, if you small business owned less than $10,000 in accounts receivables, a factoring company would not consider working with you. These days, factoring companies are willing to be more flexible. According to the president of one factoring company, only three percent of all small business that are eligible for factoring are even aware that this is an option to generate cash for the business.

Now for the bad news. As with any finance option, you pay a price for getting cold hard cash. The average fee is 5% per month of the total receivables amount, and the factoring company may not accept receivables with payment terms of longer than 90 days. In addition, you run the risk of angering clients if the factoring company resorts to harsh measures to collect their cash. Factoring gives you a definite cash option that you may want to consider, depending on how strapped your small business is for greenbacks.

Creating Multiple Streams of Income
Popularized by Robert Allen and other authors, the creation of multiple streams of income is the new frontier for entrepreneurs and small business owners. Whether this means becoming a shareholder in other companies, creating a new line of electronic products that can be digitally delivered, or doing pure investing, these days small business owners are gathering income streams from diverse markets for financial stability.

The bad news is, of course, that in a cash-poor economy you might not have cash on hand to invest in real estate or other companies (the whole goal being to bring cash in, not spend it).

The good news is that you have other assets that you might be able to convert into alternate streams of income, aside from what your small business currently brings in. For instance, as an entrepreneur you have knowledge, experience, skills, and talent. These intellectual assets are all inside your brain and, for you, free for the taking. The question then becomes, how can you turn those assets into products you can sell for an additional stream of income? Additionally, can you turn one of your company’s physical products into a digital one? Here are some of low-cash sweat-equity ways small business owners are cashing in on multiple streams of income. They are using their own knowledge plus the intellectual and physical assets in their small businesses to sell:

- educational DVDs, CDs, and ebooks
- memberships to websites and webinars
- online consulting (fixed price for a fixed job)
- networking events to match businesses with each other
- affiliate programs

Does this spark any ideas in your brilliant mind as to how you might turn your own or your small business’ assets into a new stream of income?

If you enjoyed this post, please consider leaving a comment or subscribing to the feed to have future articles delivered to your feed reader.

Photo credit: jungledrumsonline

Tags: cash flow, factoring, multiple streams of income, small business

4 Ways to Decrease Small Business Overhead and Increase Cash

What’s overhead? Not just the roof. For a small business overhead is usually the debt hanging over the small business owner’s head. Actually, overhead is the ongoing general cost of running your small business, and can include items like the cost of carrying inventory, office supplies, payments on equipment, and the cost of service providers like accountants and lawyers.

In the last few articles I’ve discussed ways small business owners can increase their cash flow into the business, by converting accounts receivables into cash. In this article, I outline four ways to decrease your company’s overhead. These simple solutions can help your business preserve cash, and stay solvent.

Decreasing Small Business Overhead

1. Barter with Others
Trading products or services with other businesses is one way to reduce your overhead. I often use this approach in with my small businesses. I may trade my writing services or web-design work for graphic design services or legal advice from another company. Bartering works well so long as both parties have goods or services of equal value to trade. If you’re not sure how to go about bartering, check in with your local Chamber of Commerce, which may already have a barter network in place.

2. Reduce Inventory
The cost of carrying inventory makes up a large percentage of the overhead for many small businesses. While it’s essential to provide your clients with what they want, there are ways to do that while trimming your inventory. First, review your inventory to identify which items are hot-sellers and which have been sitting on the shelf gathering dust. Next, locate the items that generate the best profit for your business. Finally, trim the low-profit and slow-selling items from your inventory. You can even turn this action into a benefit that can be conveyed to your customers. Turn an inventory reduction into a “specialization.” For instance, one gift store business reduced inventory by carrying only products made by indigenous people around the world. The resulting reduction in overhead has allowed the business to expand their marketing efforts, and the increase in cash flow is the overall result.

3. Renegotiate the Cost of Regular Business Services
Most small business owners are too busy to price-shop, but you’ll find that you can negotiate lower costs for regular services your business buys by doing just a little price shopping. Call around and get three to for quotes for regular business services, including insurance, long distance phone service, equipment maintenance, and delivery services. Once you find the best rate, go back to your current supplier and suggest they meet the price. If they refuse to do so, consider setting up an account with another, less expensive service.

4. Join a Buying Co-op
Buying in bulk is always less expensive. Many small business owners are now forming buying co-ops to purchase office supplies and equipment in bulk. For instance, many office supply stores offer discounts for buying paper, ink, or toner in bulk. If you don’t already have a buying co-op in your area, call up a few of your fellow small business owners and create one from scratch. You can also call your local Chamber of Commerce to see if a buying co-op exists in your area.

Reducing small business overhead is really a matter of paying attention to the details. Often, the savings you get from renegotiating your insurance policy or buying in bulk may not seem like much, but if you add up all the small savings you’ll find that your average annual savings can be significant. These days, when cash is vital to business survival, pinching pennies where you can is often the difference between a thriving enterprise and a bankrupt business.

If you enjoyed this post, please consider leaving a comment or subscribing to the feed to have future articles delivered to your feed reader.

Photo credit: Office Supply Construction

Tags: barter, cash flow, inventory, small business overhead

Are You the Sherlock Holmes of Small Business?

Horses. Murder. Mystery.

Those are the usual components of a Dick Francis novel. Dick Francis, once the Queen of England’s steeplechase jockey, is one of my favorite novelists. Why? Because he writes about two things I love: horses and solving mysteries.

If you’re a small business owner you’ll probably like books by Dick Francis, too, even if you’re not a horse freak like me. Actually, let me rephrase that. If you are or want tobe a successful small business owner, you should love Dick Francis novels … or other kinds of mysteries.

Successful small business people share one thing in common with the main characters in Dick Francis novels: a love of solving mysteries. Look around at some of the people who founded tiny companies that are now huge: Sam Walton of Sam’s Club, Gordon Moore of Intel, and Michael Dell of Dell Computers. They all love the process of tackling and solving problems.

Throwing Down the Gauntlet - Are You a Problem Solver?

Last night I was so inspired reading Robert Kiyosaki’s “Increase Your Financial I.Q.” book that today I am going throw down the gauntlet to all you small business owners out there: I challenge you to become more successful than you ever dreamed in your small business by focusing on one thing–solving problems.

This may sound silly, since business owners always seem to be solving problem, or at least fighting fires. But firefighting and problem solving are two different things. Firefighting is simply running around and dealing with whatever is most urgent in your business. Solving problems means developing final and permanent solutions to problems that plague your small business. Firefighting gives you a small period of peace. Problem solving brings your business a solid revenue stream, real profit, and a solid financial base. In other words, a permanent sense of success even in rocky seas.

Small Business Problem Solving in Today’s Economy

What kinds of problems do small business owners deal with in today’s economy? To start with, see if this list resonates with you:

- cash flow crunch
- lack of credit
- increased global competition
- failure to find or keep good employees
- clients with shrinking budgets

Sound familiar? Sound bad? It’s not. Here’s the good news. While everything may be topsy turvy in the financial world, one thing is for certain: all of these problems are amazing opportunities for you to learn how to solve problems.

I know, it sounds kinda like your mother telling you that eating vegetables is “good for you.” On the face of things, it doesn’t very exciting, does it?

But being a seasoned problem-solver is the on asset you can count on, no matter what the financial markets do. In fact, it’s the one reason Robert Kiyosaki gives for being certain that he will survive any financial disaster of any magnitude. He’s survived numerous personal financial disasters, so he knows that no matter what happens to the world economy or his business finances, he’ll survive just fine. He’s got his Sherlock Holmes skills to fall back on.

So … having said all that, I’ve had to ask myself, “Am I willing to see problems as opportunities to learn? Do I love a good mystery, even if it’s not in a book?” For me, it’s a resounding “Yes!” I love cracking the code on a good mystery. I’m as stubborn as a mule in that way. Problems that crop up in my life have a way of sticking in my craw, and I just can’t let them go until I get them solved.

Here’s a good example: I wanted to learn how to sell retail products over the internet. When I first got started, I knew next to nothing about selling on the internet. I just dove in and hoped for the best. I got lots of nothing, for months, even years. Today, seven years later, that business produces a steady passive income stream and is mostly “hands off.” That income pays all my monthly bills, so I can work on cracking the next code.

Are You a Sherlock Holmes for Your Small Business?

What about you? Have you got that Sherlock Holmes propensity for solving a good mystery? Maybe you don’t go looking for mysteries to solve, but that doesn’t mean that you can’t become an excellent problem solver for your own business.

To help find your inner Sherlock Holmes, the coming articles are going to focus on helping you, the small business owner, become an effective problem solver for the biggest problems plaguing your business today. The first stop on this mystery train will be … drum roll … cash flow.

Cash flow is king, so stay tuned to see how you can solve any cash flow problems that your small business might have!

If you enjoyed this post, please consider leaving a comment or subscribing to the feed to have future articles delivered to your feed reader.

Photo credit: Sherlock Holmes

Tags: cash flow, sherlock holmes, small business problem solving