How can you manage your cash flow and runway more effectively?

1 Track your cash flow

The first step to managing your cash flow and runway is to track them regularly and accurately. You need to have a clear picture of your revenue, expenses, and cash balance at any given time. You can use tools like QuickBooks, Xero, or Wave to automate your accounting and generate cash flow statements. You should also review your cash flow projections and compare them with your actual performance. This will help you identify any gaps, trends, or risks in your cash flow.

2 Reduce your expenses

The second step to managing your cash flow and runway is to reduce your expenses as much as possible. You should prioritize your spending on the most essential and impactful items for your startup, such as product development, customer acquisition, and team salaries. You should also look for ways to cut costs on non-essential or variable expenses, such as office rent, travel, marketing, or subscriptions. You can negotiate with your suppliers, vendors, or landlords for discounts, deferred payments, or flexible terms. You can also outsource, automate, or eliminate some of the tasks that are not core to your value proposition.

3 Increase your revenue

The third step to managing your cash flow and runway is to increase your revenue as much as possible. You should focus on generating more sales from your existing customers, as well as acquiring new customers. You can use strategies like upselling, cross-selling, referrals, or loyalty programs to increase your customer lifetime value and retention. You can also experiment with different pricing models, such as subscription, freemium, or pay-as-you-go, to optimize your revenue streams. You can also diversify your income sources by creating additional products, services, or partnerships that complement your main offering.

4 Seek external funding

The fourth step to managing your cash flow and runway is to seek external funding if you need it. You should consider raising capital from investors, such as angel investors, venture capitalists, or crowdfunding platforms, if you have a proven product-market fit, a scalable business model, and a strong growth potential. You should also explore other sources of funding, such as grants, loans, or competitions, if you qualify for them. You should be prepared to pitch your startup effectively, demonstrate your traction and metrics, and negotiate your valuation and terms.

5 Manage your cash flow cycle

The fifth step to managing your cash flow and runway is to manage your cash flow cycle efficiently. Your cash flow cycle is the time it takes for you to collect cash from your customers after you pay your suppliers. You should aim to shorten your cash flow cycle as much as possible, so that you have more cash available to invest in your growth. You can do this by invoicing your customers promptly, offering incentives for early payments, enforcing payment terms, and following up on overdue accounts. You can also do this by extending your payment terms with your suppliers, requesting deposits or advances, and managing your inventory and stock levels.

6 Plan for contingencies

The sixth step to managing your cash flow and runway is to plan for contingencies and emergencies. You should always have a buffer of cash reserves to cover any unexpected expenses, delays, or downturns. You should also have a contingency plan that outlines how you will respond to different scenarios, such as losing a major customer, facing a lawsuit, or experiencing a market crash. You should also have a pivot plan that outlines how you will adapt your product, market, or business model if your current one becomes obsolete, irrelevant, or unprofitable.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?