Sunday, January 4, 2015

4 Things Every Business Owner Should do to Have a Financially Happy New Year

Will 2015 be your year? The economy is slowly gaining speed, and according to the National Federation of Independent Business’ small business optimism index, owners are also becoming slightly more optimistic about the future. But optimism without planning and strategy is just a pipe dream. If you really want to achieve a banner year in 2015, you’ll need to attend to some basic financial aspects of your business. Here are four resolutions you can make to improve your chances of having a financially happy new year.

  1. Get Slow Paying Customers to Pay Up

Regardless of how great your sales are in the new year, you need to collect on those sales or you won’t have the cash flow you need to run your business. One of the first things you should do is dust off your past due accounts receivable files and make a serious effort to collect what’s due. You’ve probably already tried the usual tactics — sending out reminder notices, calling and emailing the customers repeatedly, and offering them a discount to pay now. If you’ve tried all of this and you still have money sitting on the books, it’s time to get serious. Here are a few more options:

  1. Pay them a personal visit. It’s easy to ignore phone calls, emails, and letters, but when a creditor comes calling, it gets people’s attention. Remind them in a friendly way they owe you money and you expect to get paid.
  2. Ask for a payment schedule. Sometimes people want to pay but simply don’t have the means. Call your clients and ask them if they can pay their balance in smaller installments. If they agree, put it in writing and make it clear that if they don’t follow through, you’ll be forced to turn them over to a collection agency.
  3. Have your attorney write a letter. People tend to take letters from lawyers seriously. Have your attorney send a letter to all of your non-paying clients and demand what’s due.    
  4. Sell them. If you simply can’t collect the debt, sell the invoices to a factor. You’ll only get a portion of their value, but if you don’t expect the customer to pay, a small portion of the invoice value is better than not getting paid anything at all.

In addition to cleaning up all of your old accounts receivables, you should create a new credit policy that drastically reduces past due invoices in the future. For example, you should run a credit check on new customers and do the same once a year on existing ones. If you notice a customer is paying late consistently, insist on cash-on-delivery payments until they have financially recovered. 

2. Get Serious About Cash Flow 

A business can’t run without sufficient cashflow — period. And if you’re like most small-business owners, you’ve already tightened your belt and increased your sales efforts. But if you want to start the new year off right, you’ll have to find a way to keep the cash flowing. Here are a few ideas:

  1. Ask for payment upfront. If your business provides products or services, create a new billing system that offers clients a discount if they pay in advance. For instance, if you run a pest control business, ask your quarterly clients to pay a year in advance to receive a discount. It will be an incentive to them and put immediate (and risk-free) cash in your till.
  2. Adjust your billing and payment cycles. Contact all your suppliers and negotiate additional discounts for shorter payment cycles. An additional 5 to 10 percent off your purchases can make a big difference in your cash flow. Another tactic is to ask suppliers to extend their payment terms, while shortening the payment cycle of your customers. This allows you to use the incoming customers’ money to pay your suppliers.
  3. Have frequent sales to move your inventory, and reduce the amount of stock you keep for items that sell infrequently. Whatever you can’t sell, place online at sites like eBay and Amazon, or, if possible, return it to the supplier. 

3. Set Your Sales Goal for the Year 

Zig Ziglar famously said, “A goal properly set is halfway reached.”  Your 2015 sales goal should be more than a number that you pull out of the sky. It should be a number you can realistically achieve, and it should be based on real numbers and trends. To reach your goal, you can forecast your revenue and work toward that figure all year. Or, you can work toward your goal backwards. Here’s how to do it:

  1. Arrive at your sales figure using last year’s sales with adjustments or projections.  
  2. Determine the primary thing that needs to happen before you can reach the sales target. For instance, based on your average salesperson’s yearly numbers, you may find that you need to hire new salespeople to reach your goal.
  3. Now figure out what needs to happen before that. You might determine that you need to transition your salespeople to work-from-home arrangements because you don’t have enough room to add more people.
  4. Continue to work backwards until you identify the first milestone that you have to take in order to reach your goal. Now, set a time frame for each milestone. 

4. Turn Your Marketing Plan on Its Head
If phone book and newspaper ads are still a major part of your marketing plan, it’s probably time to throw it out and start over. Much of today’s successful marketing is centered around the internet, even if you run a brick-and-mortar business. Successful business owners reach out to their customers in a variety of ways. Before you rewrite your plan, make sure that you can answer the following questions:

  • What do you offer your customers? In other words, what need do you fill in your customers’ lives? Hint: it’s the reason they buy from you.
  • Who are your ideal customers? Most businesses have a core group of repeat customers. Who make up your core? What are their characteristics and traits?
  • Who are your competitors? You need to understand your competitors — what do they do better or worse than you. What is their pricing strategy? Where do they advertise? 

Once you have a clear understanding of these things, it’s time to decide where you will try to reach potential customers. Your new marketing plan may involve all or some of these avenues:

  • Internet marketing. This includes your own website, social media activity, running a blog, content marketing, pay-per-click advertising, links and backlinks to and from complementary businesses, and online press releases.
  • Local marketing. To appeal to your local community, you can sponsor local events, form partnerships with non-competing local businesses, use a street team, signage, and other traditional forms of advertising such as billboards, flyers, and coupons in the local paper.
  • Mobile marketing. More and more people are relying on their mobile phones for almost everything. Savvy business owners are finding ways to reach them there. You can optimize your homepage for mobile devices, create an app and then reward customers for using it with discounts and freebies, and use permission-based marketing with text messages. 

So go ahead — pop the champagne cork and start celebrating. With a sound strategy in place, you’re sure to have a financially happy new year.

Courtesy National Federation of Independent Business.

Other CEBI Blog Articles... 

Kevin Minton
Chief Executive Boards International

No comments:

Post a Comment

Comments to CEBI Blog articles are moderated to ensure member privacy and control spam. All comments except those deemed inappropriate should post within 24 hours.