Whether youโre trying to make the next payroll or IPO in three years, cashflow is life. Balance growth and spend to reach your goal.
โ๐ธ๐๐ก๐๐๐๐๐๐๐๐ข๐๐ ๐๐๐๐๐๐ฃ๐ ๐กโ๐๐ก ๐๐๐๐๐๐ก ๐๐ ๐คโ๐๐ก ๐๐๐ก๐ก๐๐๐ ๐๐๐ ๐ก. ๐ต๐ข๐ก ๐๐๐๐๐๐ก ๐๐ ๐ ๐๐๐๐๐๐๐๐ฆ. ๐ถ๐๐ โ ๐๐๐๐ค ๐๐๐ก๐ก๐๐๐ ๐๐๐ ๐ก.โ โ ๐๐๐ก๐๐ ๐ท๐๐ข๐๐๐๐
๐ ๐ถ๐ป๐ฑ๐๐ฒ๐
There are some major tradeoffs in how you spend money:
๐๐ฑ๐ต๐ช๐ฐ๐ฏ๐ข๐ญ๐ช๐ต๐บ. Extending cashflow gives you more choices e.g. delaying fundraising resulting in retaining more equity, however...
๐๐ช๐ฎ๐ฆ ๐ท๐ด. ๐ฆ๐ฒ๐ถ๐ช๐ต๐บ. A faster exit requires higher spend, and adding investors will reduce your equity.
๐๐ณ๐ฐ๐ธ๐ต๐ฉ ๐ท๐ด. ๐ฑ๐ณ๐ฐ๐ง๐ช๐ต๐ข๐ฃ๐ช๐ญ๐ช๐ต๐บ. As a startup with limited energy, it's impossible to focus on both. You need to choose one.
๐๐ผ๐ป๐๐ถ๐ฑ๐ฒ๐ฟ๐ฎ๐๐ถ๐ผ๐ป๐
To help with expense management:
ยท Inform the team of your objectives around revenues and margins. When you give context, the team can help support your objectives.
ยท Pay for value if it will help you achieve your objectives faster, more efficiently, or save costs over the long-term.
ยท Review and replace products and software if quality, workflow, or customer experience will be the same or better.
ยท Spend money when needed e.g. to mitigate risk on compliance, security, and insurance.*
๐๐ฝ๐ฝ๐ฟ๐ผ๐ฎ๐ฐ๐ต
Ways to frame expense management:
ยท Establish strong methods to capture information so you can best understand cashflow.
ยท Control timing by waiting as long as possible to pay bills and ensure tight payment terms with collections.
ยท Install measures to ensure safeguards, such as more than one person reviewing payment, expenses, client contracts, and payroll.
ยท Lower costs on your larger expenses.
- Check if you can get a discount in exchange for free marketing
- Ask investors since they may have leverage across portfolios.
- See if banks, law firms, and other professionals are willing to offer a discount for the chance to work with you as you grow.
ยท Avoid fixed costs since you have less control, e.g. instead of hiring, check if some roles may be part-time, temporary, or outsourced.
ยท Model if your growth goes faster or slower than expected and plan to use scalable resources** as needed to manage transitions.
๐ง๐ฟ๐ฎ๐ฐ๐ธ๐ถ๐ป๐ด
To minimize costs, put controls and measurements in place:
ยท Clarify expectations around purchases and benefits. I like to start with a โuse your best judgementโ attitude and define specifics later.
ยท Review transactions for any outlier or unusual activity. For instance, compare cost categories by months and dig into any high changes.
ยท Evaluate costs in the context of whether they improve performance and customer engagement.
Running a business is simultaneously thrilling and scary, like crossing a tightrope. Cashflow is the security you need to safely cross.
------------------------------------
* The post on Insurance is here: https://www.webuildscalegrow.com/post/f4833875
** This post covers Scalable Resources: www.webuildscalegrow.com/post/d8297908
Comments