“Nah, I’m all set for growth” -Nobody, ever

Let’s be honest. Growth is sexy. Accounting is not.

Growth is the game. It’s what winning looks like. The stats you proudly rattle off are how much business you’re on track to do, how much it’s up from last year, and what rate you’re currently growing at.

Whereas for most, accounting is a box to be checked. Sure, you want it done right, but mostly you don’t want to think about it and you want to pay as little as possible for it.

I get it. To be honest, that’s how most accountants view it, too. Look at their sites (…or don’t…). The emphasis is usually on “freeing up your time so you can focus on what matters…. Starting at only $200/mo!”

Which implies: accounting really isn’t that important so don’t waste your time or money on it.

However, if you’re focused on growth you’re probably (or should be) thinking about 2 things constantly:

1. What you need to do to grow

2. How to fund #1

And there it is.

The reality is that cash is the fuel for growth and finance is the management of that fuel. Finance should be part of your growth strategy. It does matter if it’s done well (vs. just done), and you should pay attention to and be intentional about it.

These days, the default for funding growth is to raise money. But that is a relatively new thing that came about when money became cheap and access was readily available. Most businesses are built by being profitable and reinvesting into their growth. 

In my opinion, it’s an overlooked art. And it’s coming back in a big way.

Capital isn’t cheap and access to it is tightening. It’s time for everyone to sharpen their pencils and learn how to grow on their own steam.

So, over the next couple of weeks I’ll send out some of the go-to tactics we employ when bootstrapping growth.

This week, you may be surprised to see, has nothing to do with marketing or sales. In fact, nothing in this series will be about marketing tactics. Instead, we’re going to focus on how to fund and optimize those tactics. 

To that end, we start with…

PRODUCT

When we’re working with clients, the first place I look is the product to see if we can get more juice out of what already exists. 

You might want to go straight to building new channels or modifying existing ones. But you should start with your product first for three reasons:

1. Improvements will be felt here by your existing customers. You can potentially grow without adding a single new sale. 

2. Whatever improvements you make to product margins act as an amplifier to gains in your existing channels and any new ones or improvements you add. The same investment into marketing and sales will yield much better results because a sale is now more valuable.

3. You need to make sure your growth is profitable. If you are light on cash and you accelerate sales of a product that is quietly losing money, you are just accelerating your company’s demise.

1. Get clear and intentional with pricing and unit-level profitability

You can’t fund growth if your products aren’t profitable, so the first thing is to make sure your products are priced for healthy margins. This is ultimately where the cash comes from that you will reinvest. Everything else is just a way to get access to it earlier or spend less of it. But you need to have margins to begin with.

We could - and probably will - write a whole post on just pricing strategy but for now we’ll keep it high level.

Understand at a detailed level what the direct costs are, what the cost of acquisition is, and how much profit goes toward overhead and profits. Then, set your pricing strategically to do a couple of things:

• Align with and further the brand story - are you premium and exclusive, approachable and value-packed, offering no-brainer savings?

• Balance volume & margin - you need both a price point and a pricing structure that closes deals quickly and efficiently, but gets the most margin out of your product.

• Build long-term repeating/recurring customers

There are a lot of ways to engineer your pricing so that it sells but also drives great lifetime margins, and at a later point, we’ll go deeper here.

The important takeaway here is: spend time on this because it can be the biggest single weapon in transforming your business towards growth and profitability.

2. Improve payment timing and collections

Wherever possible build products and payment/pricing structures that get you paid up front or on a recurring basis. 

Good is getting paid on time, upon completion of the transaction

Better is paid up front for the transaction

Best is prepaying for future transactions

Some great examples are things like:

• Offer pre-orders

• Collect up front retainers and deposits

• Systemize auto payments with a credit card or account on file

• Offer better pricing when paying for the whole year or quarterly instead of monthly

Think about your product and get creative about how you can push your cash collections up in the cycle and ensure that payments are made on time.

To summarize: think about how you can structure your product so that it is generating more cash and you’re getting it earlier in the sales & product cycles.

Go get ‘em,

Chase…release the secret weapon!...Spenst

If you’d like to work with us on creating better cash flows through product and pricing strategy, reach out.