If you are a marine fabricator who lives in a cold climate, you need to make the most of warm months when customers are motivated to get their boats in tip top condition. Those warm months are when you can expect a healthy infusion of cash, but that cash has to be carefully budgeted for the leaner cold months. On the other hand, fabricators in warmer climates can have their own cash flow issues when they invest in equipment, have employee turnover or lose an expected project.
Wherever your business is located, you know the old business maxim “cash rules.” At the end of the day, your business success is measured by your ability to cover costs and generate new cash flow. You know instinctively that you need to conserve cash. Sometimes, however, you may find your business is shorter on cash than you planned. If you find yourself in this position, don’t scramble madly to cut wherever your instinct first takes you. Instead, view your cash challenge as an opportunity. Ponder these ten cash-boosting ideas and pick a few that fit your circumstances best.
Attract Customers. What’s your share of the market? If you don’t know, Marine Fabricator Association (MFA) can help. Identify your competition, take a rough guestimate of each competitor’s customer base, and back out an estimate of your own market share. Then, strategize ways you can build that share by 5–10 percent, perhaps through a more aggressive marketing program, promotions to repeat customers or offers to first-time customers.
Cut Carrying Costs. Ponder your long-term debt for a moment. If you’re like many businesspeople, your principal and interest constitutes one of your largest outlays of cash. Ask yourself: Can you restructure your long-term debt through refinancing your existing loans? Consolidation? New debt carrier? Bonds? Economic development incentives? Conversion of debt to equity?
Cut Overhead. Think about your fixed costs. Can you reorganize your assets to lower your costs? Sell off or lease assets? For example, do you have unused shop space that could be leased to another business? Can you find new ways to build profit from stagnant assets? Enlist business partners in joint ventures, with partners taking over some of your fixed costs?
Defer Revenue. If you sense a demand for a product or service, but hesitancy about immediate payment, consider the merits of a deferred revenue program. You’ll provide the goods now but permit loyal customers to defer part of their payment until later. No, such a program won’t yield immediate cash, but it may boost your stream of sales and cash far into the future. You already know which of your loyal customers are timely on payments; they very well may be the safest customers to whom to defer payments.
Diversify. Sure, you do quality work. And usually you make a decent profit on that work, but can you increase the variety of services or products you offer? If so, you might increase sales among existing customers—and attract new ones.
Ensure Repeat Business. Remember, your best customers are your existing customers. Consider developing a customer loyalty program or providing other rewards for customers who keep giving you business. There are some simple ways to reward loyal customers who refer business to you—like gift cards for coffee, gasoline or local restaurants.
Increase Prices. Do your prices help you meet your margin and profit objectives? How do they fare against the competition? If you think your market might support a price increase, plot a simple demand curve, estimating quantity of sales at varying price points. Then estimate your risk level. The result will be an indication of future pricing potential.
Increase Value. You already have an existing customer base, right? The question to ask: How can you increase the projects you do for people who already have relationships with you? You might, for instance, be able to enlarge the scope of the project or recommend projects to be done in the near future.
Offer Incentives. How can you entice customers to try you out? Can you start and finish the project sooner than competitors? Can you offer a better deal on materials or labor? Get clues from prospective customers. You may find a new way to build permanent cash.
Promote Cooperatively. You may devote significant resources to advertising and sales. Can you develop an advertising or sales collaborative with other noncompeting business organizations that reach a similar customer base? Perhaps you can purchase advertising collectively, develop joint direct mail and Internet promotions, or even cross-sell at retail locations—all potentially boosting cash flow on a permanent basis.