5 TIPS** READ THEM ALL! 1. Understand how growth will impact your cash burn Your burn rate is simply how much capital you go through every month. Staying on top of your burn rate is essential all the time, and, perhaps, even more so when you’re considering scaling. When you scale, your cash burn will be amplified. Any issues you have with your working capital requirements will be magnified exponentially. So keep a close watch on your cash-flow statement and a tight rein on your expenses. Bootstrap as much as possible to keep your business lean. 2. Hire only as needed When you scale, you will need to expand your staff to support your acceleration. But before you scale, it’s a good practice to get into the habit of only hiring when absolutely necessary. Hiring is a significant cost—not only payroll, but the costs of recruiting, training, retention, etc. To cut costs, outsource as much as possible, especially non-core functions like accounting, finance, and human resources. 3. Create milestones for your company Identify target milestones, create a realistic timeline, and then manage your cash to those milestones. In some cases, this may mean that you need to raise the cash to match and support these milestones. If you’ve already raised cash or are bootstrapping, you’ll need to reduce your burn rate so you can achieve the milestone before your cash is gone. Once your milestones are set, don’t let them slip. Your main focus must be executing to these milestones. 4. Get systems in place Before scaling, make sure you have a solid infrastructure for managing financial processes. How will you manage billing and invoicing on a larger scale? Or, the bigger potential headache of payment collection? If your customer base and earned revenue are still small, that’s when you need to find and establish successful systems and processes. 5. Plan for cash-flow positive If you have revenue, create a plan to help you understand how and when you’ll be able to get cash-flow positive. Scaling requires an increase in cash flow. You need to be prepared to match this with earned revenue. If you think you’re ready to scale, you may be right. But before you press on that gas pedal, ask yourself: are you sure you have a viable business model, your processes are repeatable, and the market is ready? Once you scale, you’ll be entrenched much more deeply in your processes and making changes will be much more difficult. So take these early days to establish your company model and processes, and gain an understanding of—and control over—your finances, before rushing to scale.
Posted on: Mon, 17 Jun 2013 05:41:03 +0000
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