How to grow a small business without money (Without borrowing money)
How to grow a small business with no nearly money; How to expand a business without much money, instead of raising finance through banks or investors
A constant dilemma which is faced by many small business owners is how to grow a small business without money. Let’s take a look.
How to grow a small business without money: To grow a small business without money begins with a review of your costs and overheads. By doing this exercise and by cutting costs will save your business money that will provide additional working capital to invest in growing your business.
Expanding a small business with no money at all would be a bit of a struggle. However, I have split these 14 solutions between those that require no money to implement vs those that will cost money.
All these solutions will have an impact on business growth, as they will provide the added cash flow you need.
How to grow a small business with little or no money
The first list includes business growth ideas that require no money to implement, whereas the second list may require a certain amount of investment to achieve.
If you have no money right now, implement all or some of the ideas in the first list. Then move on to implement the solutions in the second list.
7 ways to grow your business without spending money
The following are ways to grow your small business without money:
- Change your major suppliers or renegotiate prices with existing suppliers.
- Review your costs and overheads.
- Renegotiate payment terms with suppliers.
- Bill faster.
- Change the payment terms with customers.
- Be more proactive with chasing your outstanding receivables.
- Streamline and simplify your business.
Let’s now take a look at each of these in more detail.
1. Change your major suppliers or renegotiate prices with existing suppliers
Review your major business costs including your cost of sales to see if there are any suppliers that can supply what you need at a cheaper price. But be careful with this idea, as cheap isn’t always better. The last thing you want to do is to compromise on quality, thereby upsetting your customers and damaging your business.
You may even be able to speak with your existing suppliers to see if they are able to tweak their prices down. This may involve a change in ordering patterns, but it’s worth asking.
2. Review your costs and overheads
It’s all to easy when things are running smoothly and you can plenty of cash in the bank. However, when things get tight and cash flow slows down, this is when counting costs makes a difference.
It is always worth the exercise to check your overheads to see what you are spending your money on. Make sure that all the costs and overheads are absolutely necessary.
A good starting point for this exercise is to run through your standing orders and direct debits. You’ll be amazed at how many standing orders or direct debits have been left to run on a subscription that’s no longer required.
3. Renegotiate payment terms with suppliers
If you have more cash in the bank this will help you to spend more on other things that will help your business to grow. Like for example, the solutions in the second list in this article.
I don’t suggest you necessarily ask for extended credit at the same time as asking for better discounts on their supplies. However, if you current supplier is not keen or willing to offer better payment terms, if you can find a supplier that is who supply similar quality goods, it might be time to switch suppliers.
4. Bill faster
How fast you get your bills out to customers will impact significantly on your future cash flows. The faster you bill the quicker customers will pay, and the money cash you’ll have in the bank.
I always remember going to help a business that had major cash flow problems. The business was always at the limit of their bank overdraft facility. The main reason for the cash flow problem was that they were not billing customers for around five months after the service had been provided! At the time this was a relatively small business and this un-invoiced amount accounted for about £15,000 per month. Which meant that this amounted to at least £75,000 of un-billed work. Their overdraft facility was £50,000! We sorted this problem out and then worked on other aspects of the business, which grew to have a monthly turnover of over £90,000 instead!
5. Change the payment terms with customers
In addition to faster billing, you may want to consider reducing the amount of credit you offer to your customers. For example, if you currently offer 60 days, change this to 30 days. Or if you currently offer 30 days, reduce this to 14 days, and so on. Also consider getting money upfront from your customers before you supply the goods or service.
6. Be more proactive with chasing your outstanding receivables
The longer a customer takes to pay you, the more this eats into your profits. But also, the more you have outstanding as receivables because customers are taking advantage of your lax credit control, the less cash you’ll have in the bank to use for growing your business. This can lead to cash shortages in your working capital.
If you offer 30 day payment terms, make sure you are reminding customers on day 25, not on day 35. If you put credit limits on customers, make sure to enforce these. Plus where credit limits have been breached or if the customer has an overdue account, put the account on hold.
Always keep in mind turnover is vanity, profit is sanity, but cash is king! You could be selling more and more services or goods, but if none of it is being paid for, and even though your making a profit, you could wind up running out of cash and going bust.
7. Streamline and simplify your business
Now is a good time to look at your business and look for any unprofitable lines. I always recommend performing an 80/20 test using the Pareto principle. The first business I ran this test discovered that 80% of my revenues came from just 20% of my clients.
This meant that I could sack the 80% of customers that were generating just 20% of my revenues. However, information is powerful in business terms. SO armed with this information I was not confident that I could increase the prices for 80% of my customers, and even if I loss 100% of these customers, my business would still be profitable and less busy.
However, even though in some cases I tripled what I charged these customers, only a handful left. What this meant for my business is higher profits and better cash flow.
You may not want to do a Pareto check, but you may want to check that all your products and services you sell are profitable.
7 ways to grow your business spending a small amount of money
If you have begun by implementing some or all of the above solutions, you should now have some money to invest further in some or all of the following ideas.
- Introduce factoring of receivables.
- Offer credit card or PayPal payments if you don’t already do so.
- Introduce a customer referral program.
- Give something away to entice customers.
- Invest in software Increase Profit Software.
- Involve and reward your team.
- Invest more in marketing either online or otherwise.
1. Introduce factoring of receivables
If in your industry it’s difficult to reduce the payment terms you offer and still remain competitive, consider introducing factoring of receivables. Factoring your invoices gives an immediate cash injection to your business.
If you’re not sure how this would impact your business, you may want to prepare cash flow forecasts first. Whilst factoring your receivables isn’t cheap, it is a good source of cash flow.
Having instant cash in the bank almost as soon as you raise invoices to customers will give you the funds to take your business forward.
2. Offer credit card or PayPal payments if you don’t already do so
Most businesses offer credit cards these days as a method by which customers can pay. But not all do this and it’s an easy way to get your money faster, but also to attract more customers who wouldn’t otherwise have used your business.
Whilst this is a cost to your business, as you’ll lose a percentage of the sales in credit card charges, this cost should be outweighed by the increased sales you’ll receive along with. But also your cash flow will be improved too.
3. Introduce a customer referral program
Whilst a customer referral program doesn’t have to cost your business, they work better if incentives are offered to customers for referring other customers. That’s why this solution has been included in the solutions that cost to introduce.
However, the increased revenues and profits will far outweigh what it costs you to introduce the scheme. There are many ways to do this, from affiliate schemes to offering discounts or vouchers to existing customers for referring someone.
4. Give something away to entice customers
You’ll be amazed at how giving away low cost items can encourage people to become a customer. This give away can also be free to you, but would be of value to the recipient.
You give away item can be done on your website, at the reception area of your business or at the point of delivery of your goods or services.
5. Invest in software
Invest in Profit Increase Software to help you focus on your key profit drivers. Software like this will cost, but it should be seen as an investment. Anyone who invests in this software returns their investment many-fold with the growth in revenues and profits.
One of the best profit drivers I found in most businesses is the average transaction value. It might take a bit of work to gather this information about where your average transaction value stands right now, but you’ll be amazed at how by small tweaks in this number, you business profits can be transformed.
For those of you that aren’t too familiar with what the average transaction value is; the definition of average transaction value: Your average transaction value is arrived at by dividing the total value of all transactions by the number of sales. For example: If your sales were £200,000 and the number of transactions over the same period were 6,250; the average transaction value would be £32 (i.e. £200,000/6,250 = £32).
6. Involve and reward your team
Your team will often know what will make your business more profitable. Many of them have direct contact with customers and will have ideas on how to better focus your business to grow and be more profitable. For this you should reward your team for their efforts.
Also offer bonuses for meeting certain targets or deadlines to help grow your business much faster. incentivise your team to look for more efficient approaches to their tasks or with systems in your business.
7. Invest more in marketing either online or otherwise
Take time to review your marketing budget, assuming you have one. It’s important to know which marketing programs work and what doesn’t. Think about increasing you business on the marketing that is working and stop spending money on what isn’t working.
Focus on your conversion points in the customer buying funnel. The conversion points begins with for example your website visitors. Work out how many visitors convert to enquiries. Then workout how mant enquiries convert to cusotmers and so on.
Once you have these key performance indicators (KPI’s) to hand, you’ll be able to work out how to improve each one. You’ll be amazed at how small tweaks on each conversion rate will make a bug difference to your business.
Whilst a part of this process won’t cost too much money, the latter part will. This process will hopefully provide you with other information about how customers are finding you. This will allow you to better target your marketing. From there, you’ll be able to increase what you spend.
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