5 Ways Startups Can Manage Their Cash Flow

small business cash flow

This is a guest post, courtesy of Benjamin Yee, the founder of EMERGE App, a popular order, purchase and inventory management solution used in 40 countries around the world.

Congratulations! So you just cobbled together some seed capital from your friends, family and personal piggy bank. And a few angel investors that you impressed at the last hackathon pooled together a few hundred grand as well. However, the sad truth is that tech startups fail because about one-third run out of money. Here are five ways to stay lean and conserve cash while you grow your startup.

  1. Think and Live Frugally

You need to adopt a thrifty mindset and lead by example in front of your employees. This doesn’t mean dining on instant cup noodles at every meal in front of a candle. But this does mean taking the cheapest available flight if you’re regularly flying between offices and customers. Or eschewing pricey hotels in favour of local bed and breakfasts. And outfitting your workplace with second-hand furniture.

  1. Keep Fixed Costs Low

Office rents and co-working subscriptions can burn a large hole in your budget before you know it. Unfortunately, these bills need to be paid whether you’re in the office or not. You can drop the idea of an “office” for a start and simply work from a corner of your home. Instead, spend your hard-earned cash on the cloud infrastructure subscriptions that matter.

  1. Outsource Talent Where Possible

Hiring the right people can be an expensive proposition. They may not perform as advertised and their expected monthly salary is a drain. Start by hiring freelancers and assigning task-based work in the beginning. You get to evaluate their performance on a project basis. They may even be your next employee hire when you’re looking to add remote staff.

  1. Get Creative with Marketing

Your marketing budget is another potential black hole for valuable cash. It’s all too easy to drop thousands of dollars on online advertising keywords with little sales to show for it. Don’t try to outbid your competitors. Just think creatively about how to target and engage your core audience. If you want to sell your message to wholesalers and distributors then find a friendly association, social media group or trade forum to do it.

  1. Operate in a Low-Cost Country

To get even leaner, move your operations to a low-cost country. It’s incredibly expensive to maintain a Silicon Valley office complete with software engineers and a well-stocked pantry. Many South-East Asian countries offer qualified software engineers, designers and testers at a fraction of what you expect to pay in California. And fixed costs for your overseas office and living expenses for your staff are considerably lower.

Stay Lean

Maintaining a lean mindset won’t hurt your startup even if you grow and make it to a Series A round and beyond. Cash flow is still a bugbear for every Fortune 1000 company. So it won’t go away just because you’re bigger. Keep expenses to an absolute minimum and you won’t have to make difficult decisions to trim excessive costs or cut headcount during tough times.

About the Author:

Benjamin Yee is a serial entrepreneur well on his third startup, a cloud solution to help small and medium-sized businesses manage their orders, purchases and inventory. A digital nomad, you can expect to find Ben working furiously in a beach hut somewhere in the tropics.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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