Step 7: Increase your cash reserves
You’ll need money to grow your business – possibly a lot of money. Explore your options to get the money you need to fund expansion.
Free up internal cash
If possible, avoid seeking a loan or outside investment. Reduce your withdrawals or consider leasing equipment when it’s needed, instead of buying it. If you can achieve growth without borrowing to do it, so much the better.
Balance the risks and rewards of a loan
It could be that there’s no other option than to borrow money to finance your business growth, but you should be certain that it’s worth it in the long run.
Speak to your banker and your accountant to discuss the pros and cons of borrowing money.
Set up a crowdfunding venture
Not only is this a great way to raise funds, but you can grow your customer database and get people who are interested in your products and services to provide capital. They’ll be even more engaged in your success.
Consider angel investors or venture capital
If you can get investors on board, you can take advantage of their expertise as well as use their financial resources to grow your business and increase your cash reserves.
Take advantage of government grants
This is especially true if you’re considering exporting. Too often businesses aren’t aware of what the government offers to support and help them grow.
There are also ways you can grow your cash reserves from within your business.
Reduce expenses
Review your costs to spot areas you can save money. You may find opportunities where a small investment in technology (for example, subscribing to software instead of buying it) will free up cash.
Ask your accountant to review your books and make recommendations that will reduce expenses.
Free up cash from your inventory
Unsold stock is cash you can’t use. To preserve your cash and avoid getting it tied up in stock, try:
Improve your debtor management
Inspecting customers’ credit history before you extend credit terms is an important step in minimizing the chances of having cash tied up in debtors.
Excellent debtor management can be achieved by:
Investigate internal efficiencies
There are many ways to generate cash reserves by working in your business to create spare cash. Often it’s easy to forget some of the more simple tactics to build up cash.
Conduct a review of your business to see if you can cut any costs, without compromising on quality. If you’re paying monthly fees for any services, review them to identify if any can be reduced by switching to a new plan. Saving a few hundred dollars a month may not seem much but combined with all the things you pay for, and then multiplied by a number of years, it adds up.
Improving cash flow is the most effective and fundamental way to find more money. Tighten up your debt collection practices, chase slow or non-payers, and investigate mobile payment options to reduce customer invoicing activities.
Develop a cash flow forecast to predict the cash flowing in and out to better prepare for any shortfalls.
Sell unused assets
It’s almost inevitable that over time as your business grows and changes, you’ll have some assets that aren’t put to full use. Perhaps you have idle printers that aren’t really used anymore, a company vehicle that’s past its use-by date, or aging computer equipment.
Now’s the time to scrutinise your business for assets that aren’t really being used – and to sell them.