How to Prevent Your Startup From Running Out Of Money

Running out of money is one of the most unpleasant ways to end an entrepreneurship career. Many entrepreneurs are driven by ideas, and are ready to put huge effort into achieving their goals. These two are very important preconditions for running a successful business, but the third variable (and maybe even the most important one) in this business equation is the amount of funds entrepreneur is ready to invest in company’s business development.

With knowing how important constant money flow is, for running a successful business we decided to share some of the most effective and the most practical ways to prevent your business from running out of funds.

Turn your company into partnership
If you notice that your business is losing money and its cash flow is decreasing, you should act fast. One of the ways company can overcome this hardship is by turning into a partnership. New partner will bring investment funds, as well as new ideas and critical thinking. When doing this, entrepreneurs can choose between turning their Private Ltd Company into regular or Limited Liability Partnership. Most experts suggest LLP because it sums up benefits from both company and a regular partnership structure. Also partner’s liabilities are limited to their contributions, drastically decreases both personal and business risk.
Sell Stocks
Companies can generate significant funds from selling their shares. Most entrepreneurs do this to pay back their initial debts or to fund further development of their business. Before selling business shares, entrepreneurs need to hire independent analyst or an appraiser who is going to determine business’s fair value. They should also use all available share sale’s funnels, both on- and offline. Many entrepreneurs offer company shares to their employees, which is also a good idea, because it reduces company’s cash compensation needs and can make employees more agile and dedicated to their work. Other than starting Employee Stock Ownership Programs, entrepreneurs can also choose to sell parts of their business to smaller or venture capital investors.
Sell out inventory
Many product based businesses have problems with selling their inventory in full. Stocking surplus products ties lots of company funds, those that are already spent for raw materials, as well as those that company needs to invest in renting and equipping bigger storage space.
Products that are not selling the way we planned, can become a very serious problem. In most cases this problem is caused by bad marketing and unattractive offers, rather than product’s low-quality. Some of the possible solutions for selling out surplus products are:

  • Organizing sales– consumers love sales and discounts;
  • Bundling products into packages– bundle packages are popular because they contain several products that can be bought for lower price;
  • Offering surplus products as presents with newer products– your new products will be sold faster if you offer them with some incentives;
  • Exchanging them with other companies;
  • Donating surplus products for getting tax deductions;

Any of these ways can be good and effective and entrepreneurs should first try to sell their products, before donating or exchanging them.
Collect debts more efficiently
Debt collecting is one of the worst tasks that waits for every small business entrepreneur. It requires strong nerves and lots of determination. Debtors need to be reminded every two weeks about the state of their debt and statutory interests or late-payment fees that are applied to the principal.
Depending on the debtor’s behavior entrepreneurs will might need to consider hiring debt recovery agency. For most businesses this is much better way to deal with bad debt than waiting for the court settlement.
Money flow is one of the main parameters of business success. It needs to be continuous and to enable entrepreneurs to reinvest big parts of their gain back into the business. This money should be spend for improving production process and updating company’s products and services.

One thought on “How to Prevent Your Startup From Running Out Of Money

  • October 6, 2016 at 8:03 am

    Muticultural polyglots – in-house and local investigative capabilities – a lawyers networks built over the years. Your cash flow will increase and all those pay off bills will no longer be a burden.


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