Building wealth is easier said than done. Anyone who has tried to run their own business will experience a time when they just want to quit because progress is too slow for their liking. Success doesn’t happen overnight, and if you don’t hold on a little longer, you’ll never get there. But it’s also not recommended to just sit around and wait for that big break. You need to actively be out there and make positive changes.
Step One: Minimize Costs
A smaller business will have a smaller starting capital, which will be allocated to different areas. There are your manufacturing costs, logistics, and marketing. You also want to compensate your people handsomely so that they won’t switch to the bigger competitors that can bury you. It may seem hard to minimize costs at this point, but there are some areas that cost more simply because they are done in-house.
For example, if your marketing team is not having much success in SEO, all they’re doing is wasting company resources and time they could have used somewhere else. You could have chosen to outsource SEO services to pay experts a good amount without having to worry about their benefits, like you would for in-house employees. That right there is plenty of savings already, and you can eliminate your whole marketing team or divert their attention to more productive tasks, which will further save you money.
Step Two: Make More
If you’ve ever cooked, you know that it’s less expensive to prepare a big batch and buy ingredients in bulk than to cook several small batches. The energy needed to make each batch, as well as the time and effort put into each meal, will be conserved if you make one big batch and portion them.
When it comes to manufacturing, the same principles apply. You’ll save money if you make full use of each material that you have instead of just making one piece and calling it a day. You’ll have to start up your machinery several times if you work on each product individually, as opposed to making more in batches. A popular example here is fast fashion, which is able to earn from selling items super cheap because of the way they are manufactured in huge quantities. If you can keep the quality of your products but find ways to make more while you conserve energy, this can mean a significant price reduction. You’re also minimizing the trash generated by your company, so it’s a win on all fronts.
Step Three: Find Discrepancies
You’ve done step one and step two, and you’ve changed aspects of manufacturing to maximize your gains from them. If your profit margins still haven’t improved, perhaps it’s a good idea to look at the cash flow. There might be discrepancies, such as in your tax deductibles, rent payments, and employee benefits. Find areas where you can renegotiate and change partnerships with suppliers if you have to.
There are several ways to improve the cash flow of your starting business. Think of your strengths and weaknesses when you decide on the changes that will help you build wealth.