It’s difficult for experts (or even the consumers themselves) to predict exactly what’s going to fly off the digital and retail shelves over the next few months. However, even products currently in hot demand are causing cash flow issues for responding suppliers.
Cash flow crises arise from time to time. If the pandemic is giving you financial issues, you’re not alone. Fortunately, there’s a way out. Below we’ll show you how to reduce your expenses and boost your revenue to get your cash flow back on track.
Understand Your Financial Position
Before you start making budget cuts, introducing new marketing tactics and applying for small business loan, you need to get a feel for where your business stands.
First, pull your three essential financial statements:
- Cash flow statement
- Profit and loss statement
- Balance sheet
Look over these numbers to get a feel for how you’ve historically done monthly, quarterly, and annually. Don’t just look at profit, though—zero in on the specific revenue and COGS (cost of goods sold) metrics.
The COVID-19 pandemic presents unique challenges for business owners. In these uncertain times, the cash and liquidity needs of a business are paramount. Managing cash is now a critical priority and an essential part of any survival plan.
Reducing expenses is usually a lot easier than boosting revenue. You’re in complete control (mostly) of your expenses, while your sales are impacted by the market, supply and demand, and even COVID-19 regulations.
Cut non-essential spending
Only spend money on expenses tied to sales. If you’re not in the office due to coronavirus, this is a good time to pause your business’s internet package and the breakroom cable subscription. Look at your cash flow statement and ask which transactions are nice-to-haves and which are need-to-haves. If it’s only a nice-to-have, cut it.
Reduce operating expenses
Minimizing your operating expenses will increase the ROI of each sale. Here are a few areas to consider:
- Inventory: Assess your inventory and your product offering. Poor inventory management could be eating away at your profit margins.
- Transportation: Can you produce, buy, or sell locally to cut back on transportation expenses?
- Packaging: Ditch the fancy packaging for now and keep it barebones. You’ll save cents on every purchase and can get back to the frill once this pandemic passes.
- Shipping: Reduce your shipping convenience (even Prime is taking weeks to ship some items—consumers get it)
- Distribution: How well are you managing the current demand for your product?Is it profitable for you to attempt to manage every aspect of the distribution process on your own? Does the manufacturing, storage, or marketing of your product take up to much of your schedule?
Negotiate with your suppliers
Talk terms with your suppliers. Ask to see if there are any promotions or discounts your business can take advantage of. Your suppliers rely on your business to exist, so they’ll likely be willing to work with you in light of this global disaster.
Test new sales channels
If you haven’t before, now’s the perfect time to experiment with digital tactices. Explore marketing (or even selling) goods on your own site, or consider joining an online marketplace (they’re basically digital retail spaces).
With your products listed online, test how different sales channels work for your product:
- Social selling
- Google display ads
- Email marketing
- Affiliate marketing
- Content marketing
Differentiate yourself from the crowd
Your CPG products likely go head-to-head with a number of other brands. If you’re going to battle it out online, you’ll need a competitive advantage that goes beyond retail relationships. Your product will need to stand apart from the rest in one way or another. Here are a few ways to differentiate yourself:
- Price: Revisit your prices strategy. Know your numbers, research your desired market, and analyze your competitors.
- Cause: Things like sustainability and transparency resonate with customers, and they’re willing to pay more for it. Bonus: get certifed.
- Audience: Coca-Cola and Pepsi seemingly cater to the same audience, but MTN Dew and Dr. Pepper—not a chance. They differentiate themselves with bold claims, colors, and branding to target a specific niche. Riches are in the niches.