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Protect Your Cash Flow During Bad Times and Good

Money_01 There are a lot of concerns for businesses when it comes to cash flow and the recession. There are less lines of credit being extended and owners need to find ways to ensure the cash keeps flowing.

Here are some tips to help your business stay on top of the credit crunch:

Cut Back on Excess – Pay attention to where your finances stand. You need to have an active hand in your business' money management. Spend only what you need to be productive. You may even think about renegotiating pricing and terms with your vendors.

Pay Attention to Money Due – If you closely monitor who owes you money and when, you can take proactive measures to ensure the bills are getting paid and reduce the time, energy, and money you waste on collecting overdue or missed payments.

Don't Put All Eggs Into One Basket – If you are highly dependent on a singular, or small group of clients for the majority of your receivables, you can be vulnerable to money problems. The reality is those who owe you those receivables may also be at risk for going out of business before paying you what they owe. You should make sure that no one source has more than 25% of your generated income at any time.

Invest to Grow Your Business  Since credit is sparse these days, you may consider borrowing from a bank what you need in collateral and use it to make smart investments that you can use to grow your business. Investing your cash in what will bring in a consistent return may be a better option than just having limited resources of cash.

Accept Credit Cards If your business does not yet accept credit cards, you should seriously consider changing the rules. Prospects and clients may be more apt to pay up if they have the option of paying by credit card rather than cash or checks, as they do not always have the money on hand when invoices come due.

Go Beyond the Banks – Since credit at banks is tighter than ever, you may have to get creative about how you can raise capital for your business. One popular way many businesses have found to go beyond traditional bank loans is using what is known as a “merchant advance”. This is a process where a third party will analyze your credit card revenues during a certain time period. Based on those revenues, your company can get an advance that can be used for capital right away. You can pay back the advance plus interest based on future credit card receipts.

Cash flow is essential if you want to grow your business. In fact, good cash flow is critical if you want to stay in business. You need to remain active in the money management of your business, especially if you are experiencing a period of growth. Spending too much too soon without proper thought for the business down the line can be detrimental to your company's livelihood. Also, setting a precedence early for collecting on invoices due is one of the keys to cash flow success.

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Erick Simpson
MSP University
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Posted in: General Business

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Pricing Your Services In Tough Economic Times

Woman_12 Business owners face many challenges in this changing economy.  In order for your company to be successful, you not only need to provide a product or service which prospects and clients find valuable, but it must also be affordable.  Unless your business caters to clientèle that are unaffected by the recession, it is important to review your pricing strategy to ensure you are not losing business to your competitors.  Chances are once your cleints find another company that meet their needs at a price they can afford, they will not magically return when the economy rebounds. The following tips can help you price your product in a way that helps your business not only make a profit, but remain competitive.

  • Pretend you are the client –  As business owners or managers it is easy to become so engrossed in the “numbers” that you forget to consider the needs of your client.  From a business standpoint you may price your product based on your own financial goals or quotas.  Your client has little concern over the success of your business and is interested in obtaining a product or service at a price that they deem provides maximum value.  In addition to asking, “what price will return a profit?” you must also consider the value you can communicate to your clients in regards to your products and services, and what ultimate price theu would be willing to pay to receive this value.  Know your prospects, their needs and their financial situation and sell on value to set prices accordingly.
  • Understand your competition-  The recession has caused a shift in consumer spending.  As more people battle debt, decreased savings and uncertain financial futures, they are paying close attention to where they spend their hard-earned cash.  This means your clients are not only looking at the price of your products and services, but also those of your competitors.  You should do the same in order to insure you differentiate yourself and remain competitive.  If your competition is providing similar products or services at a much lower price, you must be able to respond to this through a value proposition compelling enough to close your clients on your services. If this becomes increasingly challenging, you may need to reconsider your target market, prospects (find technology-strategic and technology-dependent ones), deliverables and sales technique. 
  • Reward loyal clients -  In an attempt to drum up new business many companies offer lucrative introductory prices to get people in the door.  While this may lure new clients to your company, your value to their businesses will determine how long they stay.  Remember to reward your loyal clients by offering discounts, incentives or special offers on additional products and services in appreciation of their business. 
  • Higher quality brings higher prices –  Quality products and superior service can set you apart from your competitors.  Your prices should reflect this elevated position within the market.  The recession has certainly changed the way people are spending money, however consumers will always pay more for higher quality products whenever possible. 

At the end of the day, you must determine a price that reflects the value of your service in addressing the needs of your clients while at the same time generating profits for your company.  If you fail in communicating your value proposition effectively, and your prices are percieved as being too high, you risk alienating prospects, and if your prices are perceived as too low your company will not thrive.  Navigating the gray areas of pricing is an art that every successful business must master.

Click here to learn marketing and sales techniques to sell on value and increase your profitability during difficult economic times in The Best I.T. Sales & Marketing BOOK EVER!

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Erick Simpson
MSP University
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Posted in: Sales & Marketing

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