One of the biggest mistakes entrepreneurs – rookies and seasoned veterans alike – make all the time in business, and a mistake that can cripple their operation if not put it under faster than anything else, is not paying enough attention to cash flow in your business and really making sure that your money situation is airtight and trending in the right direction.
Obviously, there may be times where you want your cash flow to actually be negative (like when you’re trying to grow your company as aggressively as possible and profits aren’t all that advantageous when they could be reinvested back into the expansion of your company), but for the most part you want to have at the very least neutral cash flow – and ideally, positive cash flow.
In an effort to better help you manage a healthy cash flow your business we’ve put together this quick bunch of tips and tricks.
Understand your expenses
The most important thing you can do as an entrepreneur is understand exactly how much money it costs to run your business on a monthly, weekly, and even daily basis. Even if you aren’t tracking your revenue or your profits as closely as you should be (and believe us, you should be looking at those numbers under a magnifying glass) you absolutely NEED to know what your expenses are as this is your negative cash flow – the cash flow going out of your business.
Ignore these numbers for too long and there won’t be any business left!
Stop dramatically discounting your products or your services
It’s really, really popular for entrepreneurs to dramatically discount their products or services when they are getting crushed by the competition, especially if new competitors are diving into the market and offering the same products or services at a fraction of the price. There’s always going to be a temptation to “race to the bottom”.
However, because there is so much competition out there today now thanks in large part to the internet, and because someone (somewhere) is ALWAYS going to offer what you have for less, there is no end in sight to the race to the bottom – and no advantage.
Find ways to improve your products and services, bundled different benefits together to boost the perceived value of your products and services, and always look for new ways to add extra value and extra incentive that can command premium prices. There’s a reason why Apple sells electronics for two or three times (at least) more than anyone else and sells out of those products faster than any other company on the planet.
Be more like Apple and less like Amazon.