7 Strategies To Boost Revenue And Business Value

Corporate Tax ServicesWhat are the seven levers in a business that influence your cash flow, boost revenue, and increase company valuation?

Have you ever wondered how your business is perceived by others? Then, you must be familiar with the seven (7) levers in your business. You can immediately increase the cash flow, boost revenue, and/or value of your business by placing a little more emphasis on one or more of these seven levers. There is no trickery involved, and nothing particularly challenging needs to be done. However, many business owners do not invest the necessary time in understanding how their business’s financial performance actually functions. So let’s explore it.

Business owners frequently concentrate exclusively on sales volume or strive to sell more. Sales volume is essential, but it’s only one of the seven levers you have at your disposal.

What are the seven company levers that affect cash flow, profits, and market value?

The first four levers are centered on your profit and loss and consequently have a direct impact on your business’s profitability (and cash flow). Businesses are valued at a multiple of cash earnings, as is typical. Along with other factors like Brand, customer base/income streams, and internal expertise/dependence on “keyman,” these levers have a significant impact on the value of your company.

1 . Volume

Selling more – while boosting sales might help your business thrive, don’t forget to concentrate on the other levers listed below! When and how much of every additional $1 in revenue results in profit and goes into your bank account?

Create a budgeted sales and marketing plan that is in line with your entire strategy. Regularly review and adjust the plan. This will aid in keeping your attention on the right course for increasing your top line. Any growth must be long-term!

2. Pricing

Are you able to increase your prices? A 1% increase can make a significant difference. There may be a concern that you will lose clients if you raise your prices.

In order to determine which sales are profitable for you and which are not, examine your margins by product, service stream, and customer. Your break-even points must be understood! Your fractional CFO can aid because they enjoy this kind of thing!

Your pricing analysis’ findings must be integrated into your sales and marketing strategy. Less turnover can result in greater profits.

3. Cost of Goods Sold – reduction in % terms

This lever puts the emphasis on your gross margin and is most significant to businesses with direct costs like manufacturers, construction, etc.

Review your direct purchasing agreements and haggle for more favorable terms and prices. For instance, discounts for large purchases, early payment discounts, and lower freight. Although it’s crucial to maintain positive connections throughout the supply chain, you should still feel free to pose the query (or find potential alternatives).

Examine your direct labor force utilizing indicators like labor utilization, overtime rates, rework, customer complaints, and downtime. Once you have this information, you might be able to reallocate personnel or cut back on overtime and casual labor. Once more, your fractional CFO can help you with this.

4. Reducing Overheads

Although it might seem obvious, we always discover at least some extra “fat” in our clients’ overhead expenses.

Have someone go through the overheads line by line. The most common areas where savings can be made are indirect or office wages, communications, insurance, utilities, freight, and advertising. Over time, even minor cuts in some areas might add up!

These final three controls, which together make up working capital, are centered on your balance sheet. They significantly affect your cash flow, which has an impact on your finance needs as well. By reducing their cash-conversion cycle, many businesses can either avoid taking on new debt or pay off their existing debt more quickly.

5. Reducing debtor days

This entails enhancing the aging profile of your accounts receivable process (i.e. getting your customers to pay you faster).

Review your payment terms and credit control policy as consumers with a history of late payments should be handled with caution. Review your collection procedure to see who follows up with the debt and when. For some businesses, the implementation of direct debit may be the perfect solution.

6. Reducing stock days

This implies a quicker conversion of your inventory (if you carry it) into products sold, resulting in a reduction in the amount of stock you hold.

If you don’t have a procedure for taking stock, create one now. By doing this, you can make sure that your financial records reflect the situation on the shop floor. Then, look over the stock-take findings for slow-moving or obsolete stock items that may need to be discounted in order to be converted into cash. If you have an excess of any inventory lines, your purchasing rules might also need to be reviewed.

7. Increasing creditor days

This means that paying suppliers will take longer (without hurting the relationship or cutting off supply).

Re-negotiate your settlement conditions by getting in touch with your suppliers. It only requires asking; they might respond “no,” but they also might genuinely value your business.

It’s time to put the 7 levers to use now that you are aware of them in order to actually affect your business. We would be pleased to discuss how a fractional CFO can implement this with you if you lack the internal knowledge or time to do so. After all, CFOs do it all the time!