<img height="1" width="1" src="https://www.facebook.com/tr?id=2045020122447259&amp;ev=PageView &amp;noscript=1">
GF_blog_single-banner.jpg

How to Ensure Cash Flow to Meet a Start-up's Marketing Objectives

Posted by Ross Lauder - CRO

Cash flow to grow in marketing objectives

Effective cash flow management is a vital ingredient for the success of your start-up. For established businesses, cash flow is king. For start-ups, it's God.

How to Ensure Cash Flow to Meet a Start-up's Marketing Objectives 

90% of start-up failures are caused by poor cash flow

Cash flow is the fuel that propels your start-up engine forward, but it can also make your business come grinding to a halt. Even if your company looks profitable on paper, it's your cash balance that matters when it comes to survival. Ignore this harsh reality and you may find yourself running into financial trouble later on.

 

According to the D&B Small Business website, 90% of start-ups fail because of poor cash flow. This is a grim statistic, but there is an upside to it. Namely, that paying proper attention to cash flow from the start can help your business achieve fantastic growth.

 

Upfront revenue is a winning strategy

So what can you do if you don't have several million euros of funding at your disposal? The answer is to charge upfront for your product wherever possible. The precise details will, of course, depend on your business model and chosen market, but it's nonetheless vital to monetise your traffic as early as you can.

If your business is B2B (Business-to-business) then you can consider asking for an account set-up fee that is payable immediately. This way, for each new client account your cash flow will receive a tangible boost, allowing you to reap immediate benefits.

In the case of a B2C (Business-to-consumer) company, charging an account set-up fee is less common. When dealing with consumers, there are various strategies to consider. To take the example of the mobile app market, the freemium model has produced the best results for developers - providing a fully functional app for free in the hope that users will (mentally) invest in the process and eventually get hooked on the app's functionality. Developers later offer a paid version with added functionality and/or in-app purchases.

 

Take tyrannical control over your expenses

How to Ensure Cash Flow to Meet a Start-up's Marketing ObjectivesWhile revenue is key to the survival and growth of your business, there is another major factor to consider. More often than not, it's the expenses side of the equation that ends up killing many a promising start-up.

As the founder, you need to lead your team by example in controlling expenses. Closely monitor your financial outgoings. Cut costs as mercilessly as a tyrannical ruler might cut the heads from his traitorous subjects.

However, it's worth mentioning one important caveat at this point. Take great care when it comes to paying people more slowly than you originally promised. There is more to business success than cash flow alone. Paying suppliers and partners late on a regular basis will damage your reputation. Paying your team late will destroy morale.

Delayed payment strategies have their place when times are hard, but they should be reserved for last resort situations. It's much better (and easier in the long run) to develop a business model that allows you to pay your obligations on time and thereby maintain positive relationships with those around you.

Cash flow awareness is key

There are many business functions that you can delegate, but monitoring cash flow is not one of them. Cash flow awareness will help avoid overconfidence and rash decisions. This does not require you to become an accountant. Just develop an awareness of your inward and outward cash flows. It will soon become second nature.

Make regular cash flow forecasts

So what is the best way to develop an ongoing awareness of your cash flow? Make regular forecasts. It's not an exact science, but it will help you to anticipate future problems and learn from past mistakes.

Expect the unexpected

Despite the importance of making predictions, it's important to remember one thing: Cash flow forecasts are always wrong.

That's right. Just like the weather, your forecasts will never be 100% spot on. Some months they will be close to reality, but other times far from it. As such, these forecasts require constant monitoring and adjusting.

What's more, income tends to come in slower than your expenses go out. Even the most reliable customer will occasionally be slow in paying you. After all, they have their own cash flow situation to look after.

Always have backup plans and backup-backup plans. Approach financial institutions ahead of time to make credit line arrangements.  

Cash flow management is one of the most difficult challenges your start-up will face, but a solid business model with an emphasis on rapid monetisation and cost control will go a long way. Develop awareness and always expect the unexpected.

 

How to create a high-conversion website

Author:

Ross Lauder - CRO

Ross Lauder - CRO

Ross is a strategist focused on growth, applying a custom yet uniform approach to all engagements.


Related posts

Search by Topic

see all

Popular Articles

Build a High-Conversion Website

Make Your Website Work For You