How To Manage Your Business When You’re Running Short On Funds

Running a company is one of the most fulfilling and yet hardest jobs you can have. It is great to feel like you have full control of your own destiny when you are building a business until you start to see some signs that your startup may be in trouble. One of the biggest things companies early on may struggle with is cash flow.

A great deal of startup and entrepreneurial content (including my own) is focused on how to start and grow companies, as well as strategies for achieving success. However, there is a dark underbelly to growing a company. The life of an entrepreneur is not always one of joy and unbounded enthusiasm. There are also struggles, obstacles and challenges that every startup must overcome.

Here are some ways on how to manage your business when you’re running short on funds:

1. Don’t Lose Track of Success

Just because your business has run into difficulties doesn’t mean it’s a failure. Take some time and review all the successes that you and the company have achieved since conception. Actually, sit down and make a list of these accomplishments. Have you launched a product? Garnered any awards? Raised initial angel or VC funds? The list of milestones could be much larger than you think. This list can prove to be an effective tool beyond your own state of mind.

2. Figure Out Your Burn Rate

The burn rate is essentially known as how much money it costs (at the bare minimum) to keep your business up and running. Keep this number as close to very low as you can. Map out your monthly expenses somewhere that you can visualize it and figure out how you can lower all the expenditures. Create the minimal burn rate to keep yourself afloat especially when you’re struggling with cash flow.

3. Control What You Can

In any business or personal circumstance, there are elements that remain under your control. Identify what these are. Once you have a list of items that you can control, spend some time focusing on these. Often, these will be small and mundane in nature things such as aggressively collecting receivables, managing communication with your direct reports, deciding to eat more healthy lunches, etc.

4. Look For A “Cash-Ready” Partner

You may not have the money to bankroll your business right now, but someone else might. Finding someone with a ready cash flow can help you get more accomplished much sooner. You may want to consider a 50-50 business partner, but if you’d rather retain full control of your business, turning to an investor, friend or relative to raise some money maybe an ideal choice.

5. Stay Level-Headed

There will be good calls and bad calls with numerous ups and downs along the way. Don’t get too excited by every positive indication. It’s not over until the deal is done and money is in the bank. It’s also not over until it’s over, so don’t be negative until it is the last second of operations. Be realistic but optimistic at the same time and keep fighting.

6. Ask For Terms On Everything

Stretch out your money to build your business and hold on to it for as long as you can. When raising money, you want me to weary of the idea of having to give people their money back as soon as your company generates it. The reason for this is that you don’t want to be stuck in the same boat after a few months. Instead, find a way to pay out a % of profits to your ‘investor’ each month until they’re fully paid back.

7. Generate Revenues

The heart of any successful business is sales. Although it’s difficult, lack of capital can be solved by growth. In most capital constraint situations, a 30% increase in sales is all that stands between you and ultimate success. At the end of the day, it’s really basic. The more revenue you generate, hopefully the less cash flow issues you should have.

Conclusion

Cash is like a tide. It goes out and in, and out and in. Do not panic when it is out, but understand how to get more to come in. In this post, I shared with you the ways on how to manage your business when you’re running short on funds.