Between inflation, persistent supply chain issues, and trying to generate new revenue, there is potential for manufacturing business owners to face another challenging year.
While no one knows what the future will hold, there are steps business owners can take to ensure their company continues to advance. Strengthening your cashflow can help your business to sustainably grow should you encounter financial challenges and, more importantly, can help give you peace of mind. Here are 5 ways you can do just that!
1. Increase your Cash Reserves
Seems simple, right? But, are you doing it? Ensuring you have 6-18 months’ worth of expenses saved up is a good goal to give your business some cushion to withstand challenging times.
There are a variety of ways you can go about increasing cash reserves, such as A/R and A/P management. Remember to check your current inventory. You may have had other plans for the inventory, but if it’s not moving in the expected way, what raw materials do you have available to sell off to a new buyer? And how much? Your inventory supply directly impacts how much cash potential you have readily available.
In times of uncertainty, we frequently see owners purchase more inventory in hopes that the sales will come through. The cash used to purchase supplies is now tied up in excess inventory, with no definite purchase date. Optimizing your inventory so that you have a reasonable stockpile on-hand, without going overboard, will help you maintain a healthy cash reserve for your business to fall back on.
2. Diversify Your Customer and Supplier Base
Every business is at risk of concentrations, which occur when your business relies too heavily on a small pool of customers or suppliers. Concentrations ultimately put your business at risk. If something were to happen to any of those key relationships, profit and revenue loss would most likely be on the horizon.
The answer: diversification. By widening the pool of clients across various industries and regions, you are setting your business up to be turbulent-proof. If customers in one industry are heavily affected by a downturn, then you can rely on customers within other industries that you serve to still bring in revenue.
The same can be said for suppliers. Start by building a supply-chain risk-management framework. Some questions to consider would be: How much visibility do you have with your supply chain? Do you have clear view far down your supply chain so you can anticipate challenges instead of getting caught off guard. What components, materials, or parts are perceptively insignificant, but are essential for your organization? Answering these questions will help you put together a plan and determine where you need additional support. The solution could be as simple as identifying alternative suppliers, who can produce the same product if your first supplier runs into difficult times or unforeseen delays.
3. Think About Cost Reductions
When cost reduction is mentioned, many owners unwittingly believe they need to cut positions. However, that may not be the best path for you or your company. Eliminating positions to reduce costs is a sure-fire way to erode moral and trust with key employees who are essential to your daily operations.
One of the best ways that you can reduce costs is by implementing Lean Principles. Lean is the process of enhancing efficiencies in manufacturing by eliminating wasteful resources, while still preserving value. There is a lot to unpack about Lean Principles, but thankfully, resources abound.
Many organizations have employees trained in Lean Principles, such as Blackhawk Bank. Our bankers can help businesses implement strategies to reduce costs and become more efficient. For more information, click here.
4. Implement a Strategic Plan for Sales
A sales plan outlines your specific industry, sales goals for the year, factors that can impact sales, and what steps your team will take to reach those goals and overcome obstacles.
One key piece of a sales plan that often gets overlooked is nurturing relationships with current customers. Putting in the work to understand your clients pain points and their business needs presents a seamless cross-sell opportunity. Your sales team can offer solutions that are specific to their needs at the perfect time. A win-win!
Diving deep into customer relationships and fostering good rapport will ultimately lead to trust. Clients will begin to trust you and your team, which could potentially lead to strong referrals (another low-hanging fruit). A referral from a happy customer is invaluable, and shows that your team is doing something right.
5. Lines of Credit
Many owners utilize a line of credit to help them with financial needs. If you’re experiencing gaps in revenue, or unexpected expenses, then a line of credit may help strengthen your safety net.
The key is working with the right financial partner. Finding a trustworthy partner who understands your business at the basic level is imperative in your journey.
The bankers at Blackhawk Bank are well-known for offering personalized service to clients that goes beyond the average banking relationship. We can help meet your financial needs, and offer tailored guidance and assistance to help your bottom line grow.
Be Proactive in Today’s Market
While the future is unknown, this is the best time to be proactive and think ahead. Companies that are able to anticipate potential problems will be better prepared to survive turbulent times, and Blackhawk Bank is here to guide you. We have been providing fully personalized manufacturing financial solutions to businesses since 1881, and we are eager to help your business build a successful future.
This is a great time to meet with a banker to determine how we can meet your financial goals. Click here to contact us today!