As a business owner, you will naturally want to do everything you can to improve its financial performance. Whether you want to have more funds available for growth or to make more of a profit, you’ll be wondering what the best ways to generate some additional income are.
Here is our list of the six best ways to improve your business finances:
Improve Cost Efficiency
The fastest way to improve financial performance is to make your operations more cost-efficient. Depending on the nature and size of your business, this can mean anything from renegotiating contracts with current suppliers to cutting down on the cost of office space – or even letting some employees go.
If you want to consider this tactic, first determine what you can potentially save on. Is there an expense you can eliminate? Take a look at every expense, item by item, and see what room there is for saving.
Only take the most drastic steps if the situation is dire and you need cash quickly.
Grow Your Revenue
The other way to work with what you’ve currently got, so to speak, is to increase your revenue. You can do this by increasing sales to your current customers or finding new ones.
Consider various tactics for increasing average order value. Can you increase your free shipping threshold? Can you set up a rewards system? Look at various ways to upsell and cross-sell your product or services.
Also explore ways to generate more leads. Set up a referral program, start doing cold outreach, or start networking in person. Whatever makes the most sense for your business.
Invest in Stocks
The stock market provides ample opportunities to improve your finances. You will need to get familiar with the way it operates, the expected earnings, and the best stocks to invest in, so this is a somewhat time-consuming endeavor that requires plenty of effort.
Depending on your goals, you can invest in stocks that are likely to have a higher yield in a shorter amount of time or blue chip stocks that will have a lower yield but that also come with much less risk. You can use a tool to calculate your stock averages to determine the state of your portfolio and see where you stand.
You can also outsource your stock market investments to a broker, but note that you will need to pay a fee for their services.
Pay Off Your Debt
If you have any outstanding debt, paying it off can help improve your financial situation. The savings you make on the interest can be quite substantial.
Before you choose to take this step, make sure that you talk to your bank and see what options are available. Most banks will negotiate better terms with business clients than the ones initially agreed upon, so it’s worth giving them a call to hear if they have an offer for you.
Expand Your Offer
This tactic will only work if expansion is a feasible option for your business. For example, if you are currently operating in a certain area, by extending it, you can reach new customers and increase your revenue. Or, you might take your offline business online and increase your revenue that way.
If you offer a certain service, is there a way for you to start offering another one? Can you expand to a new market? Is there a way for you to market yourself to a new audience that has not yet heard of you?
Consider the expenses this step will take. If you don’t have the money and manpower to invest in growth, this is the wrong way to improve your financial performance.
Increase Your Prices
Finally, increasing your prices can be a good way to boost your financial performance. This is especially applicable if your prices have been the same for a long time and if they’ve failed to match the cost of inflation.
Of course, you’ll want to make sure that your customer base is not shocked and offended by your move. Warn them of the price increase in advance. This can increase your revenue in the short term, as people want to spend money while prices are still lower. Offer discounts to loyal customers and explain why the prices have been raised.
Carefully calculate the price increase so as to make it completely worth your while but at the same time acceptable to your customers. Check out what your competitors are charging, and make sure you are not a complete outlier in the pricing department.
Wrapping Up
Before you choose any of these tactics, make sure to carefully consider your needs and goals. Do you want to generate more money in the short term, or are you fine playing the long game? Base your decision on the specifics of your current situation and where (and when) you want to get.
