Melissa Houston is the author of Cash Confident: An Entrepreneur's Guide to Creating a Profitable Business, and the founder of She Means Profit.
Often, when small business owners find themselves short on cash, the immediate assumption is that they're no good with money. However, it's important to dig deeper to understand if the cash flow issue is merely a symptom of a larger challenge within the sales strategy.
There are three main profit drivers within a business: pricing, sales volume, and expenses. Each serves as a critical component, influencing the overall health of cash flow.While you might be making sales, if the pricing isn't right, profitability remains elusive, and hence the cash flow suffers. Too low, and you're leaving money on the table; too high, and you may deter potential customers.
Sustaining and growing your business requires a steady increase in sales volume, which means constantly refining your sales funnel and bolstering your customer acquisition tactics.. Even with a robust sales model, poor financial management can lead to cash flow issues that can cripple a business. Once you've identified the root cause, it's time to take corrective action. If it's a sales problem, revamping your marketing strategy, adjusting your sales approach, or perhaps redefining your product offerings could be necessary. If it's a money problem, enhancing your financial forecasting, tightening expenditure, or seeking financial advice may be in order.
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