TIPS FOR INCREASING CASH FLOW IN A STARTUP
Increasing cash flow is always a primary goal among startups, but it can also prove to be the most challenging, so what are the best tips for increasing cash flow in a startup? It’s tempting to turn towards investors when looking for an influx of cash, and there is no doubt that investors can bring in significant funds. But they also come with strings attached: you have less control over how your company will be run, and if things go wrong, you may find yourself without any money at all.
New and early-stage startups often find themselves in a precarious position when it comes to cash flow. One of the main reasons for this is that most new companies have a lot of expenses but very little revenue, and as a result, they find themselves going out of business before they even have a chance to turn things around.
So before you take on an investor to save your company refer to these tips for increasing cash flow in a startup.
3 Important Tips To Increase Cash Flow
TIP 1: PRIORITIZE YOUR EXPENSES
Prioritizing your expenses is one of the most important steps in maximizing your cash flow. It is a common assumption that every expense needs to be cut immediately when times are tough, but this is exactly the problem with limiting yourself to cutting expenses alone.
When businesses make cuts based only on the immediate need for money, they often end up destroying any chance of long-term success by cutting out viable services or products that could actually bring in future profits. A great example of this is related to accounting and bookkeeping. With the help of an accounting and bookkeeping service, it’s possible to manage finances more efficiently and grow more successfully. However, many startups fail to hire an accountant due to the fact that it is a small chunk of money and they assume they can do it all on their own.
Rather than cutting out such expenses, there are better alternatives that enable you to continue to grow your startup company. A better option is to find the revenue streams that are producing the lowest returns and work on eliminating excess expenses associated with them. This way, you can decrease your monthly outflow without taking away from future growth potential.
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Not All Expenses Should Be Cut Out Immediately
Not every expense needs to be cut completely, so don’t limit yourself by thinking this way. Try coming up with creative ways of bringing money into your business that have little or no financial investment but could create significant income for you later on. You may need to invest some time into building these revenue channels before they become productive, but once they do, they will offer an excellent source of additional income for your company. Search Kickstarter-type platforms online for marketing ideas and ways to monetize your business without taking on extra financial risk.
In today’s economy, it’s more important than ever to be smart about your business expenses. While cutting costs is always a tempting option, it’s important to remember that not every expense needs to be eliminated altogether. In fact, doing so could actually harm your business in the long run by limiting its growth potential.
TIP 2: ESTABLISH CREDIT LINES
If you work with other companies that provide services for your business (such as website hosting or product manufacturing), then ask them about establishing credit lines with these providers. The benefit of this move is twofold: first, it will allow you to avoid high cash transaction fees when paying for services. Second, it can often lead to better payment terms and discounts. This is because the providers will see your company as being more creditworthy, which can give you a bit of breathing room when it comes to cash flow.
Be sure to ask about a credit line, not a payment plan. A payment plan may end up costing more in the long run due to interest rates and transaction fees, while a simple credit line should be cost-free or have a minimal fee attached.
TIP 3: GENERATE MULTIPLE REVENUE STREAMS
As mentioned earlier, it’s important to have multiple revenue streams in order to protect yourself from any one stream drying up. This is even more important for startups, as they often do not have a large customer base that can be counted on for consistent income. You don’t want to put all of your eggs into one basket and then watch as that basket gets smashed.
Come Up With A Variety Of Ways To Increase Cash Flow
Instead, try to come up with a variety of ways to generate revenue and land you more business. This could include product sales, subscription fees, advertising, or affiliate marketing. The key here is to be creative and to think outside the box. There are many different ways to make money off of your business, so don’t limit yourself by only thinking about the most obvious options. Keep your eyes open for new opportunities, and be willing to try out ideas if you believe they could work.
Make sure you don’t focus on one revenue stream too much or it can become your main priority. Instead, think of multiple streams that can produce income at different times throughout the year or month. This will give you a better sense of security because you know that even if one stream dries up, there are other sources that can keep things afloat until it recovers.
CONCLUSION: Tips For Increasing Cash Flow
In conclusion, there are a variety of ways to increase your cash flow in a startup without sacrificing future success. One option is to establish credit lines with providers of services you use regularly. This will allow you to avoid high cash transaction fees and get better payment terms and discounts. You can also generate multiple revenue streams to protect yourself from any one stream drying up. By diversifying your income sources, you’ll have a backup plan in place in case one source of revenue falters. Finally, remember to keep your eyes open for new opportunities and be willing to try out new ideas. If it seems like it could work, there’s no harm in giving it a shot.
If you can successfully implement some of the tips mentioned above, you will find that your cash flow situation will improve in the long run and as a result, you will find yourself in a much better position to succeed over the long term. Investors are not always the answer, and with a bit of creativity and effort, you may be able to increase your company’s cash flow without them.
Companies such as Startup Tandem offer cash flow management services for startups just like you! You can learn more about their culture and what they have to offer by calling them to learn more.
Keep these tips for increasing cash flow in mind as you move forward with your startup and good luck!