Cash Flow Crisis or Sales Slump
Solutions To Solve The Problem
These days, slow sales seem to become a cash flow crisis rather quickly. After weathering the Great Recession, auto recycling businesses are still waiting for the sales volume to return to “normal” or at least predictable levels. New car sales are said to be back on track, which should in turn create an inventory of trade-ins, which should stimulate used car sales and thus force buyers to either scrap out project cars or seek used parts for repairs. But waiting for the trickledown effect can bring about a cash flow crisis. When researching solutions to the sales slump problem, the common denominator seems to be, (of course), reduce cost and increase sales; high school economics class all over again. But maybe a bit more innovation is required in the new millennium.
Reconnect With Existing Customers.
In our industry we may have become accustomed to reduced sales from reliable clients as their business is also slow. Since our products are “downstream” it may be time to re-engage and make a sales call or set lunch meeting with a longtime customer who hopefully is seeing an uptick in repair work.
Address Pricing Issues.
First, run sales or promotions and second, raise your prices. Despite the constant complaints about the price of normal goods, such as milk, bread, clothes, etc., many small business owners have not significantly reviewed their own pricing structures even when their suppliers have increased the cost of goods.
Keep your business ready to do business. This tactic came down to two schools of thought, either sell some assets to create cash flow or leverage assets through borrowing if the slump seems short term. Most likely auto recycling facilities have already done this or “sold off their scrap metal to make payroll,” a quote I only wish I could attribute to just one speaker!
Dun & Bradstreet Credibility Corp. (http://creditsolutions.dnb.com) published an article by Dave Donovan that outlines five easy ways to increase cash flow. A couple worth mentioning are:
Use Business Debt Smartly.
While so many consider accruing business debt a bad thing, it can actually help cash flow needs. If you are sure that your sales slump is temporary, or you are experiencing an expected seasonal slump, then taking out a small-business loan or falling back on your business credit cards can help offset your sluggish cash flow until sales pick back up again. The key is to resolve the debt you accrue once the sales pick up. As long as you do that, your business credit and its debt should be just fi ne.
Incorporate More Package Deals.
Consider incorporating package deals to make them more attractive and cost-effective for your customers. For instance, bundle together some of your top-selling products and offer them at a discount price.
The website Small Business Trends, (http://smallbiztrends.com), also posted an article on how improve cash flow, based on the ideas from the Young Entrepreneur Council (YEC). Some of the top 10 answers include:
Eliminate Unnecessary Expenses.
Comb through bank statements and eliminate the reoccurring expenses that don’t drive value.
Bundle whenever possible. You can consolidate both the small and large items for savings.
Restructure salaries to a lower base with a higher bonus or commission payout. You’ll incentivize your employees to meet goals, focus on the company’s success and decrease your expenses.
Ask For Upfront Payments.
Instead of allowing customers to pay half upfront, half later, ask for the full payment upfront. There’s a chance most customers won’t care about the change and you’ll have a steady flow of cash.
This article appeared in the January / February 2014 IAR Recyclers News Press. It was compiled by Sue Schauls, IAR executive director.