Keeping cash flow strategies green
Want to reinvent your business? A popular strategy is to return to the startup model. It reinvigorates the enthusiasm and drive that characterize a business launch, spurring innovation and idea generation.
We see it in notions like “skunkworks” and “idea labs”. The track record, however, is patchy. Ideas emerge, but they often lack traction in the marketplace. Plenty of great innovations are still born; they are long on vision but lack financial discipline.
What’s missing? A key business instinct behind successful startups is survival. They rarely begin with fountains in the lobby. The more likely launching pad is the garage.
Short of funds, the startup has to make it work on a limited budget. New businesses have to focus on cash flow in order to survive. That can generate innovations that are just as important as the “great idea”.
Harvard professor, Ian Macmillan, called this a strategy of asset parsimony.
Some of his guidelines?
- Do not buy new what you can buy secondhand
- Do not buy what you can lease
- Do not lease what you can barter
- Do not barter what you can borrow
- Do not borrow what you can salvage
- Do not salvage what you can get for free
Not a bad list. You can use it to review any business project – new or old.
What can you actually achieve with the amount you have?
Positive cash flow comes from getting more money in. But it also comes from reducing the amount going out. Expense-saving practices are also innovations.
Maybe you need to streamline your ambition. What is the simplest route to get to the first goal? What 20 per cent of the effort gives the most result?
Investigate free resources and less-expensive alternatives. Need a vehicle? A new one will lose 25% of its value the moment you drive out of the dealership. Buy second-hand – and lease it.
Look on the net for resources at steep discounts. Anybody can now make a first-phase website in a few hours using free software. Cut communication costs with Skype. You don’t need an office if a virtual one will do. What resources do friends and colleagues have? Can you collaborate to the benefit of both parties?
This strategy can also raise cash
Firms are slow to liquidate redundant assets that take up valuable space and require maintenance. Do you have assets that can be rented out during their downtime? What can you sell on eBay?
When Apollo 13 appeared doomed, engineers on the ground physically collected samples of the resources available on the spacecraft: plastic tubing, bits of wire, odd electronic parts. Working through the night they crafted a jury-rigged solution. The astronauts repeated it in space. It was enough to save the mission.
Whether you are reinventing your business or starting a new one, try applying parsimony to reinvigorate financial discipline. The chances of it being a financially success will be greater as a result.