Generating Cash Flow in a Startup

The difficulty of starting a business and propelling it to the next level starts with the challenge of generating cash flow to meet day to day operations of a business. Usually the startup idea don’t take up first, there’s different stages which a business goes through before breaking even.

Don’t be excited with your new idea or product by thinking you will hit the bank paying your bills and enjoying the fruits of your investments. There’s a stressful moment of waiting as your cash dwindles, waiting on startup to generate cash flow may feel like a lifetime wait. The cash stress of keeping a startup running can kill a viable idea before it reaches it potential.

After you have tested the idea, believed in the idea and your market research proves there’s a market for your product and services the next step should be accessing funds needed to sustain your business idea.

You cannot sustain a startup without an idea of how much it is going to cost to set the business running. Vision and leadership without fund raising is not enough to bring the idea into the market.  As a founder of a startup you have to estimate the initial capital required to run the business, things may change up later as business grows and you may have to inject more funds to grow the business or move the business to the next phase of the idea development.

Sustaining a startup regardless of the size is a game of cash management reinforced by passion and vision; embrace the skills of playing tight game of cash management to ensure the success as a visionary.

There are different channels for raising funds, but as entrepreneur you have to embrace your heart to deal with difficulty of getting funds to sustain your business. Raising funds is not an easy game, especially when you are trying to breakthrough with your first startup. Raising funds won’t break you up if you belief in your idea.

Different channels of accessing funds include

  1. Tapping on your own savings. This is the first step of proving you have faith in yourself and belief in your own idea; don’t expect others to invest in you if you have not invested in your own idea.
  2. Reach into your inner circle, family and friends. If you are able to pitch to them and make them belief in you, then this can be a source for your initial starting capital. But don’t be discouraged if they try to talk you out of your idea, your vision and research should sustain you through the phase of naysays.
  3. Get ready to brush through outside your inner circle and reach forth to the outside world. This will require pitching yourself through different funding channels and laying down your financial plans on how you are going to achieve your goals. Understand where you are going and be ready to walk people through each and every step of your direction.

 

Sources outside your inner circle include.

  1. Banks are reluctant to fund a startup but don’t count them out. If you have established a strong relationship with a bank, the relationship might be a facilitator of the bank willingness to extend line of credit to you.
  2. Make early arrangements with your suppliers to extend line of credits for goods and services. The arrangement gives you the ability to sustain your startup using revenues because you are able to spread cost over a period of time and pay the bills out of revenues generated from sales.
  3. Approach outside investors. If you are willing to relinquish someone of your ownership you can approach outside investors such as angle investors and venture capitalist. Plan on how much equity you can relinquish without giving out total control of your business, you are the master of your ship and you have to navigate your ship to its destiny.

Other smart ways of bringing your startup into reality may include looking deeply into your cost structure and formulating a plan which will sustain you through foundation stage. This may include-

  • Sharing office space with other business
  • Delaying capital purchase
  • Leasing instead of buying
  • Using outsourcing services instead of hiring
  • Generate smart way of savings by using technology to achieve your goals, rather than travel use teleconferencing and use free communication channels to build a strong team.

The determination and focus you put in building your startup will determine how far you will go. Funds should not hold you a slave of your dream, if you dream it and you want it so much you should be able to move into the next step of making the startup a reality.

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