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Startup Year One: 3 Tips to Maximize Startup Cash Flow

Profits are the difference between a successful business and a failed one. Just think about it. There’s a lot of advice out there on how NOT to fail inside the first year, or to last until the five year mark. However, all that advice really boils down to is whether your profits exceed your expenses. In other words, your cash flow.

How much those profits exceed expenses will determine just how successful you really are. Profits allow you to go the extra mile for customers. They allow you to buy better equipment, upgrade to a better facility. Profits allow you to expand and open the door to getting even more profits.

Improve startup cash flow with these tips

Here are 3 tips to maximize your startup cash flow in the first year:

1. Become a number cruncher — cash flow is king!

It rarely takes a year to have a wealth of clients lining up at your door. That is, if you have a good marketing strategy that delivers your message to customers where they hang out. First, you need to make sure your monthly cash flow meets up with the terms set out by your landlord, suppliers, and other creditors. This means setting your invoice payment terms with customers to ensure the money is coming in before you have to pay your bills. Next, you need to constantly analyse your pricing strategy to determine whether there are pricing gaps — lower or higher than your own — you can exploit to increase cash flow by lowering or raising your own to boost sales. Offering prepay incentives with clients is also a good way to get more money coming in, even if it costs you a little in lost profits.

2. Always look for ways to boost credit — dig a well BEFORE you’re thirsty!

The advice in the heading is as pure and simple as it gets. It’s hard to start a thriving business if you don’t have an iota of credit to tap into when cash reserves dry up. This means paying your debts on time and taking credit when it’s offered to you — even if it’s high interest credit. A disciplined business owner will use credit when needed — such as when there’s an overlap between owing money to creditors and receiving it from customers — then pay it back ASAP to avoid interest charges. If you don’t have good credit, consider setting some cash aside and getting a prepaid card. Credit is also essential to preserve net working capital during lean times, too.

3. Focus on a referral based marketing strategy for best year one results.

The big problem with marketing is that it generally costs a lot of money to get customers at first. That’s not to say marketing necessarily gets cheaper as you go along; just that a startup with few funds will find it even harder to set money aside for customer acquisition. That’s where focusing on getting as many referrals as possible can literally pay off big time. Go above and beyond for each customer, no matter how much it may pain you to do so. An extra hour spent doing those little extras will get customers excited about what you offer, especially if the competition refuses to do so. And — the big AND — customers will be far more likely to rave about you to others when they know you’re willing to go the extra mile. This is because you’re adding extra value and making the customer feel like they’re getting more than they paid for.

focus on referrals to maximize cash flow

As the saying goes “more money, more money.” The more you have, the more you’ll make. There are indeed a lot of things a CEO needs to know to start a successful business. A big bank account and ample credit (Ie., cash flow) are the definite be-all, end-all when it comes to survival in the first year, and beyond.

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About author

Chad Stewart
Chad Stewart 119 posts

Chad Stewart is a staff writer for Noobpreneur.com who has worked in business for the better part of 16 years now. He got his start in the down-and-dirty world of intermodal logistics management, before moving into more challenging roles in retail and warehouse management. Chad holds both a Business Marketing and Operations Management degree from Sir Sandford Fleming College. In his spare time he enjoys traveling the world, time with his dog, fishing, snowshoeing, watching UFC and is an avid fitness buff.

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