Investing a large amount of your time, energy, and resources into your startup puts you on an exciting but risky journey. You may well know that sinking feeling that comes with realizing that your business is struggling. Before you go into panic mode, consider implementing the following strategies that can help buoy up your floundering startup.
#1. Face the Budget
Before you started your business, you likely spent endless hours on working and reworking your budget, and that process should continue as long as your business is still in operation.
- Sit down and compare your projected budget with your actual receipts and expenses, making note of anything you didn’t expect.
- Look for ways to cut expenses.
- Maybe you can switch suppliers or consume less electricity in the office.
Brainstorm as many ideas as you can.
#2. Perform a Cash Flow Analysis
Once you have a thorough knowledge of your budget, you can transition into performing a cash flow analysis. Such an analysis helps you pinpoint your business’s high and low periods and arms you to prepare for tough times. It’ll also help you use resources wisely when things start to go well again. Scotiabank.com points out that the information from a cash flow analysis “can be used in many ways, such as timing your borrowing, arranging the right amount of staffing, and boosting your marketing efforts during lulls.”
You may want to consider enlisting the services of an accountant when you calculate your business’s cash flow. Yes, hiring an accountant is an extra expense at a time when you need to focus on saving, but an accountant’s expertise can save you more than it costs you.
#3. Expedite Cash Receipts
Timing is an intrinsic element of obtaining a good cash flow. The more quickly you can receive money for services and goods rendered, the better off you are. Because sending out club-fisted goons to collect payment isn’t exactly legal, you can try the following tactics to speed up your receipts.
- Evaluating payment terms. If you give your clients 45 days to pay, consider cutting it back to 30 days.
- Enacting stricter policies when it comes to extending credit to customers.
- Charging late fees to tardy customers.
#4. Make Wise Use of Credit
While running to the bank in a desperate search for a loan is far from the first thing you should do when financial trouble creeps up on your business, a loan can serve as a useful tool for getting things back on track. If you need to make a major purchase, like a car or some new computers, think about buying it on credit so you can leave your cash free.
A business credit card or small credit line can also prove handy in dire times. You can use it to treat that desirable client to an awesome meal or pay for the supplies to print those beautiful new marketing brochures.
However you choose to use your credit, treat it like a knife without a handle. If you don’t take precautions and end up wielding it too roughly, you’ll get hurt. Think long and carefully before putting your business in more debt.
#5. Use Continuity Sales
A continuity sale rewards customers for buying from you for a certain period of time. For example, if you sell gourmet coffee, you can offer to deliver fresh products every week for 10 weeks at a lower per unit price than if the customer paid for each deliver separately. Since customers pay upfront for continuity sales, this increases your cash flow right away and encourages customer loyalty.
#6. Make It a Team Effort
If your startup is in trouble, be upfront with your team about it. You can brainstorm ideas together for improving cash flow. Inc.com also suggests that you “Remember that your employees will be motivated by the targets you set for them.” Targets can include collection goals for collectors and you should encourage your sales team to focus on customers who pay quickly.
The time when your business starts to encounter rough waters is nerve-wracking, but don’t let a little scare rob you of your focus. By making a few adjustments and getting help from the experts, you may pull off a miracle and see your business start to thrive.
Images: ”Startup business text illustration design over a white background / Shutterstock.com“
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