cash-flow-wreck
Pricing discounts help, but a more sustainable strategy is to analyse what your customers are buying, at what price point and when, and try and give them more of that.

Ensure the survival of your business by developing a strategy to keep up with ongoing expenses.

In a SmartCompany webinar from Business Victoria, global accounting network MGI Australasia chairman Grant Field and award-winning curated marketplace hardtofind.com.au founder Erica Stewart discussed fundamental growth strategies to ensure your cash flows smoothly.

Plan your cash flow

“We wouldn’t be successful without a growth strategy,” says Stewart, whose company that celebrates small creative businesses was named one of Australia’s top 20 online retailers by SmartCompany last year.

“We’re a curated marketplace – we have more than 30,000 products on the site, none of which we hold in stock. We have sellers and we have customers, so it’s hard to find the marketing platform that connects the two. For example, the money comes to us, and we pay our sellers in arrears minus our commission, which means there’s always a positive cash flow,” she says.

The brand is able to plan their marketing activity around this cash flow, taking into account the ebbs and flows of various times of year. Christmas is the busiest time of year, signalling to the team that they can ramp up their marketing activity as there’s more cash to play with.

Be prepared for every eventuality

The hardtofind.com.au business strategy includes a best- and worst-case action plan that can be used as needed.

“We use a number of tactics to quickly boost sales just before we need to pay our creditors if required. By the end of the financial year we usually have about 10 versions of the cash flow forecast because that’s how quickly things can change and we need to prepare for it.”

Apart from nurturing a positive cash flow, Stewart says one way to generate more cash is to sell more to your existing customers.

“Pricing discounts help, but a more sustainable strategy is to analyse what your customers are buying, at what price point and when, and try and give them more of that.”

Think long-term

Managing cash flow effectively is an essential part of harnessing a successful growth strategy. From a big-picture perspective, Field recommends a model called ‘Now, Where, How’, which looks at the place you are now as a business, where you want to be and how you can get there.

“It’s important to get clarity around your purpose and vision, undertake analysis of your competitors, and understand what your brand positing and value proposition is. Then communicate that with your target market,” he says.

In terms of product cycle, understand all products typically go through all phases: growth, plateau and decline.

“Identify when a product is going through a declining phase and reinvent it. The reality is though, with some products and services that might not always be possible and it takes courage to admit that.”

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