Alternatives to raising capital
Identify areas in the business to make savings
There’s a good chance that you can generate at least some of the capital you need by using business savings. If you can generate the cash internally, it’s often a better option than increasing your debt or taking investors on board.
- Look at how much you’ve got available in cash reserves or what contracts or payments are due.
- Check if you can make savings or increase your cash flow by selling equipment you don’t use very often, cutting down on travel expenses, moving some staff from full-time to part-time roles, renegotiating deals with suppliers for better credit terms, and reducing your own salary.
- Look into leasing equipment instead of buying it. If you want to improve your capacity so you can handle more orders, that doesn’t necessarily mean you have to fork out for the additional equipment you’ll need – you can lease it. You can also lease equipment only when you need it, rather than having it sitting around gathering dust and being unproductive when you don’t.
- It's also worth looking into contracting out some work, especially for large projects. Contractors will often have all the resources they need to handle work, and when you bring them on board you’re getting access to those resources.
- You could also consider forming partnerships to jointly produce your goods. For example, if you manufacture coffee tables, you might align your business with one of your suppliers, making it cheaper to get the raw materials you need.
You’ll be surprised at how much all these savings can add up, generating more cash in the business that can be used to reinvest in business growth.
Shorten cash cycles
Shortening your cash cycle will increase your cash reserves, keeping your business going and providing a buffer in times of financial uncertainty. The longer your business goes without cash, the longer it takes you to pay your creditors, and the riskier your business becomes. Encourage your customers to pay using online and mobile payment options – the cash is then in your account immediately. If you have to invoice, do it immediately and incentivize your customers to pay early, such as by offering discounts. You can also shorten your credit terms.
Increasing sales is one of the best ways to improve profitability and bring more cash into the business. There are several different ways you can improve your sales numbers, such as making sure you and your staff are all trained in how to cross-sell and upsell, investigating new distribution channels like an online store, implementing a professional sales system so that you can track customer buying behavior and predict their needs, or even look into franchising your business if demand warrants it.
It’s important to remember the 80/20 rule: 80% of your sales will come from 20% of your customers, so look into ways you can sell more to your existing customers while still trying to gain new customers through your marketing strategies.
It’s always worth considering a price increase too. There are ways to increase your prices without losing sales, and it’s something that should be done now and again, even if it’s just to keep up with inflation.
Other options can help your sales numbers and it’s worth looking into them before you go borrowing money.
Strategic alliances are often worth checking out. Business owners are increasingly discovering the advantages of joint ventures and strategic alliances and many experts see strategic alliances as one of the best paths to rapid growth. There are many ways in which you can work with other businesses or people, ranging from short-term joint ventures to more formal long-term commitments. You can form strategic alliances with suppliers, customers or with complementary businesses, or with non-profit organizations such as charities. Think of how often you see a Subway attached to a service station.
It might also be worth looking at updating your business model. A change in your business model might help you find new opportunities for growth to increase your business’s revenue. Direct selling is the shortest route between your business and its customers. It involves buying directly from you without any go-between. It’s probably the simplest and certainly the most direct business model.
Like many businesses, you might currently sell some items through the web but is it time to make a bigger investment in the online world? Global e-commerce is rising daily and the growth opportunities are significant.
Whether you want your goods distributed widely through wholesalers or via carefully selected retailers, the tweaks you can make to your distribution channels are almost limitless. If you’re a retailer, you might consider also selling at the wholesale level, and vice versa.
For informational purposes only. There is NO WARRANTY, expressed or implied, for the accuracy of this information or its applicability to your financial situation. Please consult your financial and/or tax advisor.