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Best Strategies to Improve Your Cash Flow

Best Strategies to Improve Your Cash Flow

As a business advisor and chartered accountant, I believe my job is not simply to crunch the numbers. Sure, it is important to know where the money is coming from and going, but it is also important to make sure money (cash flow) is coming into the business, consistently. In fact, the number one reason for businesses failing is poor cash flow. Cash flow is confidence.

Cash flow is created by:

  •  Generating leads (marketing);
  • Turning those leads into customers (sales).

There is no limit to the strategies you can use to bring in business and turn prospects into cash-paying customers. Let us discuss business marketing strategies:

Marketing comes in many shapes and forms, let me share with you some of my favourite ideas.

Gift Vouchers

For around a dollar, you can create an extra product that people can purchase for others. A gift voucher provides flexibility for people who are unsure which of your product range may suit the person they are buying for. Do not include too many “Conditions of Use”, as people are paying you cash in advance. It is wise to include an expiry date, but do not exceed 12 months. Make sure your voucher is attractive and well-designed, and is presented in a quality envelope. Make your vouchers difficult to duplicate – include a serial number and log the vouchers into a gift register.

Customer Referral System

If every customer referred one person to you, your business would double. Most businesses say they rely on “word of mouth”, but very few have a system in place to generate those referrals. Do not assume that customers are reluctant to make referrals. Your customers like you, trust you, and believe you provide quality and value, exceeding that offered by your competitors. Otherwise they’d be using someone else! But you have to make it easy and rewarding to refer others to you, (they won’t always be thinking of you; it is your responsibility to remind them).

The best way, is to just ask them for referrals. Identify your good customers and tell them you appreciate their business and want more loyal customers like them. Most people will be flattered and only too keen to help. Give them a voucher to give away, and another one to keep for themselves.

Another idea, is to invite your best customers to a Customer Appreciation evening, (or a seminar) and ask them to bring one or two friends along. This must be an event that provides genuine value. Make it all about them, not you. Do not make it a sales pitch.

Regular Specials

Everyone enjoys a bargain, because it makes them feel like a winner. By offering them extra value, you give them an extra reason to buy from you, (especially if your competitors refuse to offer special deals). But the real trick here is to offer special deals ​on a regular basis.​ If you offer a new deal every month, you will be amazed how people will keep you in mind and check out what your upcoming deal is. It also keeps your marketing message fresh. If the deal only lasts a month, (you can make it shorter) it creates a sense of urgency, because people don’t want to miss out. If you start with just six special deals, you can offer these twice a year. Here are some examples:

  • Two for one deal;
  • Buy one, get the second one half price;
  • Spend $100 and receive a free [item]
  • Free delivery worth $35.00;
  • Free seminar worth $45 (limited places);
  • Free installation worth $45.00.

All the major supermarkets know the power of having regular specials. As we browse the meat section, we are so easily drawn to the current specials and load up the freezer if we find a bargain.

Customer Guarantee

Every time a prospect buys from you, they take a risk. How do they know if the product or service they purchase, will meet their needs? What if it fails? Do not assume they will happily return it, as many people feel too embarrassed to make a fuss. If they are unsure if it will work, they will simply choose not to buy it. You can reverse the risk, by offering them a guarantee. Many business owners say, “I can’t do that. What if they keep enforcing the guarantee?” It makes sense that it should be the seller, not the buyer, who takes the risk. It is the seller who should back the quality and effectiveness of their product or service; and they are in the best position to put things right. Naturally, you want your customers to be happy with their purchase, (otherwise they will share their bad experience with others)?

The Warehouse​ may not offer the highest quality products on the market, but you know if your item is defective, you can return it and get an immediate and full refund, without any fuss.

Legislation like the Fair Trading Act and Consumer Guarantees Act, exist to protect the public, and business owners need to accept this trend will only grow. If you are uncomfortable about offering a wide guarantee, you can simply word your guarantee so that it reflects the customer’s rights under the law.

Loyalty Card

If you want customers to keep coming back, give them a reason to do so. They have already bought from you, so it doesn’t take as much effort to get them to make subsequent purchases. Cafés know how powerful this is, because they offer their coffee cards, e.g. buy 10 coffees and receive your next one free. They know that the free coffee only costs them less than a dollar.

This strategy works well for businesses who offer products and services that customers buy on a regular basis, as opposed to items they buy rarely.

Bundling Products

This is a proven way to increase the average sale per customer. A prospect may approach you with the intention of buying one item, but you can tempt them to increase their purchase, by adding other items to their order. This is called “bundling.” Takeaway shops use this strategy very effectively. While you can customise your order, the retailer offers (say) a $10, $20 or $30 pack that is worth somewhat more value than that. Tyre retailers will offer deals for replacing all four tyres on your car, plus a wheel alignment. Bus companies and fitness centres will sell multi-passes at a discount.

Bronze, Silver, Gold Options

A clever way to upsell your customer, is to offer tiered packages. This may be offered as a Bronze, Silver or Gold package. The business draws the prospect in with a low-priced “bronze” offer, with the intention of persuading them to upgrade to a higher-priced (more profitable) silver or gold package. Airlines do this well. They might offer a cheap “budget” fare, but then offer upgrades (and add-ons), which the customer finds hard to refuse. This can include an upgrade to a better seat, or to business class. It could include paying for meals and entertainment.

Domino’s​ offer a $5 pizza, but as you browse through their offerings, you may find more expensive pizzas to order. I often wonder how they can offer a $5 pizza and make a profit, but it is probably just a loss leader. They make their money on all the upgrades and add-on sales.

The starting point is to create your “bronze” offer. What is a basic, low-priced offer that will appeal to most of your prospects? How can you present it in a way that they find it difficult to ignore, (remember, the goal is not so much to get them to buy the bronze product. It is simply to use it to get the prospect’s attention and for them to look at your other offerings).

Checklist

I heard of a hardware store that used a checklist strategy to increase sales. When a sales assistant approached a customer and found out they were painting a room, they produced a comprehensive checklist, pen and clipboard, for the customer. Instead of the customer buying a $20 paint brush, they might end up walking off with paint thinners, sandpaper, drop-sheets and a ladder – a $300 sale. Business owners may feel this is pressure selling. I prefer to see it as providing excellent customer service; (Imagine the frustration when the customer returns home and discovers the items they didn’t buy!)

I know a lawyer who trains all their legal employees to talk to their conveyancing clients about wills, powers of attorney, property sharing agreements and family trusts. Not a single client has ever complained or felt pressurised. Rather, they felt their lawyer was looking out for their best interests.

A restaurant’s menu is a checklist. A hairdresser and beauty therapist will often provide a list of their services, to show the prospect what they can choose. But these tools are really just a “catalogue” that appeals to all their customers. Instead, take the time to break those products and services down into groups, so that they appeal to customers with a particular need.

Joint Venture Relationships

If your advertising or lead-generation ideas have failed in the past, it’s very likely to have arisen because you have targeted “cold” prospects, i.e. people who don’t know you and/or have never bought from you before. But you will achieve much better results, (300-400% better results) if you seek leads/referrals through your existing database. This is because you have an existing relationship with these people. They know you, trust you and are more likely to act on any offer you make – compared with people who haven’t dealt with you before.

But you don’t want to limit your marketing efforts to your existing customers only. There are thousands of new prospects out there to target. But how can you tap into this lucrative market, without approaching them cold? Easy – by approaching them through someone else, who has a pre-existing relationship with them. It’s called “joint venture marketing”, and in my opinion, it is the most exciting and under-utilised form of marketing. Here’s how it works …

Who do you know locally, (a friend, family member or customer) who owns a business with lots of customers that fit your target market profile; and someone who really looks after their customers? Imagine how great it would be, if they were to tell their customers about you.

But very few, if any, business owners will help you, if it takes too much time, effort or money; or if there is no benefit to them, in doing so. Therefore, I suggest you print out vouchers or referral cards, for the other business owner to give away to their customers. If done properly, it can make them look like a hero to their customers.

I know of a mechanic who works with a panel beater. He gives the panel beater the following vouchers to give away to customers, (with a short note to say nice things about the mechanic):

  • A free set of wiper blades (fitted);
  • A free WOF;
  • A free engine steam clean;
  • A half price service;
  • A free safety check.

The more generous that your offer is, the more likely it is the prospect will take up the offer. The cost of the offer is your investment to gain a new customer.

Let me finish by saying, that this tool has the ability to return tens of thousands of dollars in extra business, especially when you consider the lifetime value of a customer. It costs very little to implement and will set you apart from all your competitors – how many of them are doing this?

Here is what you need to do:

  • Find a joint venture partner, whose customers fit your target market;
  • Develop a special offer or giveaway, that would appeal to those customers (low cost to you; high value to them);
  • Create the offer as a voucher, flyer, letter etc;
  • Approach the other business owner and sell the benefit of the idea, in terms of their interests, not yours.

Sales Techniques

No business will succeed if it can’t sell its products and services. Selling is the process of converting prospects into customers. There is no such thing as a “born salesperson.” If someone is good at sales, I bet they have been trained well and they follow a proven sales process. While there are many ways to sell, here are a few strategies which, if implemented, will certainly improve your conversion rates:

Building Rapport

We tend to buy from people we know, like and trust. It takes time to build rapport and generate trust. Here are a few simple and practical tips to get people to like you and trust you, faster:

  • Use their name and pronounce it correctly;
  • Smile often, as appropriate;
  • Take a genuine interest in them, rather than talking about yourself;
  • Find common ground between you;
  • Use common courtesies, e.g. thank you, please;
  • Compliment them genuinely, but don’t overdo it;
  • Be a good listener, and don’t interrupt them;
  • Maintain eye contact;
  • Be positive and don’t criticise them or others.

You must tailor your rapport-building, to the other person’s personality. Sociable people like it when you spend a lot of time building rapport and can find you pushy if you talk about business matters too quickly. But direct people, will get frustrated if you are too friendly for too long; they prefer you to get straight to business.

Asking Quality Questions

If you want to be more effective in sales, master the art of asking the right questions. Have you ever heard people praise a salesperson, by saying they have “the gift of the gab?” It’s true, that a good salesperson knows how to say the right things, but only after they have discovered certain critical things about the prospect. This is where the ability to ask quality questions, comes into play.

Screening Process

The first set of questions to ask, are “qualifying questions” which screen the prospect, to determine whether they are likely to want your products or services. Unless the prospect has approached you, you can’t be obvious with these qualifying questions, otherwise you can come across as being a pushy salesperson.

A good real estate agent knows to ask subtle questions, to quickly determine whether the prospect is a local homeowner. A consultant knows what questions to ask, to find out whether the prospect is a business owner.

What subtle questions can you ask, to qualify (or disqualify) a prospect? What critical features do they have to possess or lack, to be a potential customer for you? How can you phrase those questions, so they sound genuine and caring, as opposed to being pushy, aggressive or self-serving?

Discovery Process

Once you have qualified the person as a good prospect, you need to discover whether they have a need for your products or services. Not only that, you need to ask the questions in a way that they feel that they really do need your help.

The first part of the discovery process, involves asking “Now questions.” You are trying to find out where the prospect is right now. Who is their current supplier? What is working well, and what isn’t? How much are they spending? What problems are they experiencing? Do they make these decisions on their own?

The second stage is to ask “what if” questions, which are designed to find out what the ideal solution would look like from the prospect’s point of view. Here are some examples:

  • Describe the perfect product/service for me;
  • How would you like it to be?
  • If you could have the perfect product, what would it look like?
  • If it could work better or faster or more efficiently, what would that look like?
  • How soon would you like to achieve this desired state? Why?

Note: You are not making any promises that you can deliver this future state. You are just trying to find out what is important to them. In the back of your mind, however, you might be working out how your business can meet these needs.

The third stage is to find out what their barriers and obstacles are, i.e. to discover why the prospect has been unable to achieve their perfect scenario. I like to ask, “So what has been stopping you from achieving that outcome?” When they give me an answer, I might ask them to expand, or just ask, “What else?”

The final stage of questioning is to ask, “How important is it to you ​personally,​ to have that sort of result?” This is to discover their motive to change. The stronger their emotional drive, the more likely they are to do business with you; (you really need this if you expect them to leave their existing provider). The following example answers mean you have a very motivated prospect in front of you:

  • It means my family will be proud of me at last;
  • It means I can feel good about myself;
  • It means my boss will finally trust me again;
  • It means I can provide for my family;
  • It means I can protect my family;
  • It means I can sleep at night;
  • It means I will live a long life.

So that’s the questioning process. When was the last time a salesperson had a conversation like that, with you? Probably never. That’s because most salespeople don’t ask any, or certainly not enough, quality questions. They go straight into selling mode and start talking about them and their products and services. But if you think about it – how can they persuade you that you need their products and services, when they don’t know anything about you?

Please note:

  • You can choose to ask these questions in sequential order or mix them up. The prospect might mix up their answers, which is okay (don’t correct them and ask them to stick to the script, because you don’t want them to know you’re following a process).
  • You are not selling during the questioning phase. You are only gathering information that you need when you offer your solution. It is tempting to jump in during the questioning phase and say, “I have the perfect product for you” or “I can help you with that.” You must resist that temptation, otherwise you will lose your momentum and frustrate your prospect, just when they were beginning to trust you and think you actually care about them.
  • The more complex and expensive your product or service is, the more time you need to spend in the questioning phase (and vice versa). You would only do a shorter version of this process, if you were a tyre retailer. But you might spend a couple of hours asking questions, if you build new homes for people.

Presenting Your Solution

Now that you know what the customer needs, you get to have your say. This is when you get to share with them, how you may be able to help. This is when you talk about your product and services. In giving your proposal, you want to:

  • Show them how you will take them from their “now” to their “desired state”;
  • Explain how you can help them overcome their barriers and obstacles;
  • Remind them how good they will feel when they reach their desired state, (this is the emotional step);
  • Why your offering is so much better than what they are using, (or not using) at the moment;
  • What the features and benefits of your offering are.

All your statements will reflect the things that are important to the prospect. They will not include anything that the prospect indicated was unimportant. You know these things, because you asked all the right questions. Being a good salesperson is as much about what you don’t say, as it is about what you do say.

Closing the Deal

Once you’ve presented your solution, it is important to ask for a decision. You should do it confidently, immediately, and in a way that assumes they will say “yes”. One of my favourite ways to do this, is to simply say “So, I suggest we get the process started, by filling out a Client Information Sheet and booking in our first consultation next week. Does Thursday at 10 am suit you?” This is called an “assumptive close” and it makes it difficult for the other person to say “no”.

Handling Objections

Of course, there is no guarantee the prospect will say “yes”. They might have a few objections. You must be able to confidently answer these objections. I expect 95% of the objections will be the same. They might include:

  • That is very expensive;
  • I don’t think I need it;
  • I’m not sure that will work;
  • I can’t afford that;
  • It isn’t the right time for us right now;
  • Let me think about it;
  • I need to talk to my partner;
  • Can you leave me with some information?

I don’t want to go into all these objections in detail, but I want to make a few comments about the much-feared price objection:

  • They should have discussed their budget during the questioning phase;
  • If they literally don’t have any money to pay you, you should have picked this up in the screening phase;
  • It probably isn’t about the money. Rather, they haven’t seen the value in your solution;
  • It might be an excuse, for another reason that they are reluctant to share. You can overcome this by saying “Apart from the Investment, is there any other reason why we can’t proceed?”

Once you’ve answered their objection to their satisfaction, ask for the order again, using a slightly different method, (don’t use exactly the same one you did earlier, but you can refer to it). For example, “Well, I suggest we get started. Here is the Client Information Sheet and a pen.”

I just want to finish, by saying this: it might feel awkward to sell this way at the start, but you will get better as you practice it. Don’t revert back to your old ways that lost you more prospects than you won. Dare to be different and stand out from your competitors.

In case you’re wondering, the above process follows the teachings of some of the best sales coaches and training organisations in the world. All their advice follows a method that is identical, or very similar, to what I have shared above.

How did you find the article? This is a chapter from my book: Starting a Business, Growing a Business. The Critical Insights No One Tells You About, But Should. If you are in business, you know how challenging it can be at times. If you’ve thought about running your own business, you’ve probably heard the odds are against you being successful. But all is not lost… Get your copy of my book where you will learn more tips to keep you on the path to success!

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