How can you manage cash flow when scaling a lean startup?

1 Know your numbers

The first step to manage cash flow when scaling a lean startup is to know your numbers. You need to track and measure your key financial metrics, such as your revenue, expenses, profit, cash burn rate, and runway. These numbers will help you understand how much money you are making and spending, how long you can survive with your current cash, and how much you need to raise or earn to reach your growth goals. You can use tools like QuickBooks, Xero, or Wave to automate your accounting and reporting, or create your own spreadsheet or dashboard.

2 Plan your cash flow

The second step to manage cash flow when scaling a lean startup is to plan your cash flow. You need to forecast your future income and expenses, based on your growth assumptions and scenarios. You also need to identify your cash flow gaps, which are the periods when your expenses exceed your income, and how you will fill them. You can use tools like Float, PlanGuru, or Pulse to create and update your cash flow projections, or use a simple cash flow statement template.

3 Optimize your cash flow

Optimizing cash flow is the third step to manage cash flow when scaling a lean startup. This means finding ways to increase income and decrease expenses without compromising your value proposition or customer satisfaction. Strategies such as raising prices or upselling existing customers, reducing customer acquisition costs or increasing customer lifetime value, negotiating better terms with suppliers or vendors, cutting unnecessary costs or outsourcing non-core tasks, and applying for grants, loans, or tax credits can all be used to optimize cash flow.

4 Monitor your cash flow

The fourth step to manage cash flow when scaling a lean startup is to monitor your cash flow. You need to regularly review your actual cash flow against your planned cash flow, and adjust your actions accordingly. You also need to track your cash flow indicators, such as your cash conversion cycle, your working capital ratio, and your break-even point. These indicators will help you evaluate your cash flow efficiency and profitability, and identify any potential issues or opportunities. You can use tools like CashAnalytics, Finagraph, or Fathom to analyze and visualize your cash flow performance, or use a simple cash flow dashboard.

5 Automate your cash flow

The fifth step to manage cash flow when scaling a lean startup is to automate your cash flow. You need to streamline and simplify your cash flow processes, such as invoicing, billing, collecting, paying, and reconciling. You also need to integrate your cash flow tools with your other business systems, such as your CRM, ERP, or POS. This will help you save time and money, reduce errors and fraud, and improve your cash flow visibility and control. You can use tools like FreshBooks, Stripe, or PayPal to automate your cash flow operations, or use a comprehensive cash flow management platform.

6 Anticipate your cash flow

The sixth and final step to manage cash flow when scaling a lean startup is to anticipate your cash flow. You need to prepare for the unexpected events and challenges that can affect your cash flow, such as market changes, customer churn, product failures, or legal disputes. You also need to plan for the future opportunities and milestones that can boost your cash flow, such as product launches, partnerships, or funding rounds. You can use tools like Scenario, Riskalyze, or Monte Carlo to simulate and test your cash flow assumptions and outcomes, or use a simple SWOT analysis.

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?