Top 3 Cash Flow Tactics

How do you define success in your business? To me, it means the ability to take consistent cash distributions from a company.

1) Repurposing prices

This tactic could work for both inventory and service based companies. Get creative on pricing. Instead of taking your slow moving inventory and deeply discounting it by 40-50% off, try repacking or bundling it with other items and run it as a limited release or flash sale. Or if you normally offer services at an hourly rate, try a one-time or seasonal consultation program.

Some examples:

• Product or inventory companies — If you sell apparel, you could create a bundle of 3-4 products sold as an entire outfit; or you could add pre-sales or pre-orders for out-of-stock or not-yet-released products
• A service-based company might group 2-3 services together (like a single flat-rate package for bookkeeping and taxes); tiered based offerings with a clear outline of what's included can be an excellent cash generator for service companies (pair this with tip #2 below)

2) Revenue detached from hours or products

Again, this one works for both inventory and service based companies. The common terminology here is "retainer." Think about it as getting paid for being available. The goal is to generate revenue detached from hours worked or orders shipped. It's that simple. Every business should have some element of this at work.

What could you offer to achieve that?

• For inventory-based companies, maybe it's a warranty program, paid membership program with perks, loyalty programs, events or experiences, etc.
• For service-based companies, it could be: unlimited support tier, flat fee pricing, digital products, licensing or white-labeling, recurring maintenance plans, etc.

3) Salary cap

Any business can use this approach to managing payroll. To be clear, I'm not advocating you should cut headcount, but how long has it been since you reviewed payroll expenses closely?

During COVID, most businesses I work with saw big increases in wages, headcount, benefits, etc. Many of those businesses saw a spike in volume during 2021-2022 and a leveling out in 2023-2024 to pre-COVID growth rates. If that's you, have you evaluated your payroll needs recently?

How a salary cap works

There are 2 approaches here:

1. Start with your weekly and monthly cash flows excluding payroll — Take your weekly or monthly cash inflows. Decide on your desired profit margin (e.g., 10%). Subtract this margin from your total cash inflows to determine your salary cap after covering non-payroll expenses. Example: If weekly cash inflows are $20,000 and your target profit is $2,000 (10%), you're left with $18,000 for expenses. If you're already spending $15,000 on non-payroll expenses, your salary cap is $3,000 per week.
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2. Start with your last 12-month P&L — Apply the same logic to your annual P&L for a broader view. Start with total revenue and subtract your target profit margin to set a cap on total expenses. Example: If annual revenue is $1,000,000 and you want a $100,000 profit (10%), you're left with $900,000 for expenses. If non-payroll expenses are $750,000, your payroll cap is $150,000 annually.

These quick and dirty calcs could be very different from your current payroll amount, so dig into the differences. Are any positions no longer necessary at current sales levels? Do you need to hit certain growth targets to justify higher headcount?