When business is booming--generally a "good problem" scenario--it can be easy to fall into the trap of thinking things will stay that way. They very well may, but it likely won't be without some serious evaluation, maintenance, and investments of time, effort and money. Here are five steps that will propel you in the right direction.
Prevent Cash Flow Issues
Managing cash flow for a growing business can be tricky. Beyond making sure you always have enough cash or credit (which you should always prioritize), understanding common pitfalls and challenges can help you plan effectively. What's really important to remember is that with increased revenue comes increased costs.
More demand involves ramping up production, which includes everything from hiring additional labor, to exploring new sourcing avenues, upgrading technology, and more. Those investments often materialize before the revenue from increased sales does. In other words, don't put the cart before the horse. Focus on creating a scalable infrastructure by continuing to deliver the same level of service, quality and performance as you adapt to increased volume. This will help increase the likelihood of sustaining long-term positive cash flow rather than a blip on the charts.
Maintain a Robust Supply Chain
No business operates independently. Successfully meeting consumer demand requires sustaining the continued receipt of goods, so your supply chain is really the heartbeat of your whole operation.
Prevent supply chain disruptions at all costs. Keeping an open and consistent dialogue going with your existing supply partners should be a standard operating procedure. Beyond that, a smart way to avoid disruptions is to diversify your supply chain so you have options in the event a problem arises with your primary supplier.
Supply chain diversification isn't just an "in case of emergency" strategy; it can benefit your business as much during lucrative times as it can when disaster strikes. Regularly exploring different channels for sourcing products provides you with options for comparable or even better alternatives, as well as new ideas and opportunities.
I always suggest looking into local suppliers, too, as the advantages of proximity are plentiful. They include minimizing your carbon footprint, increasing speed to market, gaining more control over your materials, and reducing overall costs.
Put an Exclamation Point on Inventory Management
Good inventory management goes hand-in-hand with good cash flow management. Too often we hear the story of the brand whose business was so good it put them out of business, as least temporarily. A driving cause of this unfortunate and all too common consequence is poor inventory management. Demand is great, but it only works when you can keep up on the supply side.
Managing inventory is a careful balancing act. Order too little and you risk delays which can result in frustrated, angry, and even lost customers. Order too much and it's taking up valuable space in the warehouse, which is costing you money in more ways than one. This is where automated inventory management software comes in very handy.
With a proper inventory management system in place, you can analyze how quickly any given stock-keeping unit (SKU) is moving, allowing you to analyze sales patterns, manage lead times, improve forecasting, streamline omnichannel operations, and keep your business trending upwards.
Determine a Pricing Strategy
When your commodity is in high demand, there is an opportunity to increase pricing, but doing so should not be a foregone conclusion. Raising prices may turn a profit quickly, but how will this impact your customer's lifetime value? A price change should not be simply a response to a competitor or sudden market shift (I'm looking at you, price gougers). It should always be well thought through and set based on a deep understanding of your customers and your product's value in a dynamic market.
Invest in Your Business
Extra revenue gives you the ability to do things you've always wanted to do in your business but haven't been able to yet. Take stock of initiatives you've been thinking about or have had on the back burner and consider investing in ways that positively impact your people, your products, and your productivity.
Is there technology or software you can invest in that will increase efficiencies? Are there benefits or training programs you can offer employees to improve recruitment, retention and internal growth efforts? Is now the time to take a calculated chance on a new product line or acquisition, or are you better off taking this opportunity to build a war chest for a future emergency?
Perhaps there are partnerships to be explored--whether you're a startup with a great product hoping to break into a market, or a nationally recognized brand seeking to increase market share, co-branding and other cross-promotional strategies can be an invaluable tool for growth, but they can be pricey.
While it's important to acknowledge and celebrate success, the good times are no time to sit back and relax. When things are going well, that's when it's time to buckle down and take a look at how you can carry your good business fortune into the future.