When the government stimulus incentives were in play, many business owners felt protected. These safety nets provided a way for many cash-strapped organizations to navigate uncertain waters. But now that those programs have ended, what will the future hold?
Will your business be resilient enough to bounce back better and stronger than before?
Financial sustainability is key for both short-term and long-term success. REDF explains, “Sustainability is maintaining a reliable recurring revenue stream to cover expenses and achieving financial results that are consistent with the expectations of the organization.” Available capital, comfortable profit margins, steady revenue, thriving customer relationships, and scalable production are all key components of a company’s financial sustainability.
Is your business ready to sustain itself?
Startup capital is essential for getting a business off the ground, but its capital needs do not end there. Working capital provides the resources needed to continue, and even expand, daily operations. Bringing in additional capital improves cash flow, making it easier to manage the lifeblood of the business and facilitate long-term strategic planning. When outside capital is not needed to pay for the ongoing expenses of the business, it can fund future growth.
Remember, while government stimulus funds have been turned off, outside funding has not run dry. Applying for a bank loan, working with a third-party lending agency, or seeking outside investors are all common ways to provide an infusion of capital.
Improving Profit Margins
Companies with tight profit margins will feel the effects of a downturn or market disruption more swiftly than their counterparts with higher margins. They will also find it more difficult to recover in the wake of these challenges.
However, simply increasing prices to pad profit margins is not the solution. Inflating prices can cost you customers because it allows competitors to undercut you on both price and value (offering more products/services for the same price point). Understand what your customers’ purchase process looks like so you can prioritize marketing on the channels that are most important to them and providing the kinds of resources that will influence their purchase decisions.
Work on both sides of the equation to both reduce costs and increase perceived value. When cutting costs, be sure not to hamper revenue by reducing product quality or deliverability. Instead, improve production efficiency, eliminate waste, reduce transportation costs, and prioritize environmental sustainability to improve your bottom line. Aim to make the most of the organization’s available assets – both tangible and intangible.
Remember, improving profitability is the most sustainable way to improve cash flow. Even in times of relative stability, nothing stays the same forever, which means that sustaining your business requires a constant dance of pivoting and evolving to stay relevant.
Holding Revenue Steady
In any organization financial projections and reporting are key strategic revenue planning tools. Regularly report on and analyze sales and profitability numbers and other benchmarks to ensure you are hitting revenue targets.
Ensure financial reports are accurate and timely to inform ongoing business decisions. Tracking key metrics on an ongoing basis allows you to reforecast budgets and pivot your revenue strategy as needed to stay on track when the market or other factors constrict planned business operations. Set attainable goals and regularly measure progress against those goals to gauge the effectiveness of various activities and initiatives as the company adapts.
Analyze and revise your revenue strategy based on available data. Certainly every organization would prefer to grow revenue, but in the wake of a business disruption the primary goal is the old “bend but don’t break” strategy of keeping revenue steady during and immediately after the crisis to avoid major dips or a continued downward trajectory.
Cultivating Customer Relationships
Continue to connect with prospects and nurture relationships with customers to retain your top accounts. Encourage honest feedback and incorporate it to improve products, pricing, and support on an ongoing basis. Maintain this feedback loop to let your most responsive customers know you value their input and truly desire to create products and experiences that meet their needs. Use feedback to inform sales and marketing strategy as part of a broader revenue strategy. Reward brand loyalty and encourage brand advocacy to ensure you will have a solid customer base to rely on regardless of what the market does in the future.
Invest in the people, processes, and equipment needed to support ongoing production and scale up efforts in accordance with long-term growth plans. Provide the tools and resources needed to support both short-term and long-term production capabilities.
Prioritize retaining key staff to avoid knowledge gaps that can stymie revenue goals. When needed, outsource business activities to maintain profitability while still preserving critical business functions. Whether employees are in-house or retained through a third-party, communication expectations clearly to provide transparency on goals and the overall strategic vision.
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