Self-fund with a 90 Day Cash Boost.

Summer is often a slow time and businesses are feeling the crunch.

Here is what we did to boost cash in a turnaround:

Sometimes a turnaround came with an infusion of cash, but many times it did not. You had to make do with what you had available and if it's a turnaround, it probably wasn't much.

As such, the FIRST thing, right out the gates, is to boost your cash.

I want to note, this is not boosting profitability and net cash flow. That of course is the long term goal of a turnaround but you can't solve that all at once at the beginning. You need money to fund initiatives that will do those things. For now, we just need to make more cash available to us as quickly as possible so we can fund the things that will bring long term change.

It focuses on 4 things:

1. Growth - obviously - but not in the way you think

2. Expenses - also obvious so won't take much time here

3. Cash Cycle

4. Pricing

Let's do this.

GROWTH

No sh*t is probably your first thought and yeah. It's obvious. But most growth takes capital or time, you have neither. Long term we want sustainable, scalable growth channels. Today we need quick wins. So here's what cash sprint growth looks like.

1. Sign quick wins to get to capacity. If you’re short on cash 90% of the time you’re way under capacity. Makes sense right? You’re spending money on a full person and generating revenue off half a person. Not great, Bob. You need to get to capacity so take quick wins, small project, stuff you maybe would normally say no to but just get the work in to get money coming in and utilize the team you’re paying for. Cut deals where appropriate to get them closed ASAP.

2. Look to existing customers. Your shortest sales cycle is with someone who already knows you and has said yes. So what can you do for add on sales with existing customers or clients? One-off special projects? Bump them up to the next tier? Add a few more units? Offer discounts, cut deals, whatever gets it done to get short term revenue and use existing capacity.

3. Use your extra capacity to do free work (after you’ve done a & b of course) for existing or nearly closed customers. Sort of a free sample. Make sure there’s more paid work to win if it goes well, then when it does (because of course it will, Tiger) then close the rest of it.

4. Don’t work on big, long campaigns or hiring more sales or bringing on an agency. That is phase 2 of the turnaround. Stick to the quick wins now.

EXPENSES

Yep. You’re going to have to cut expenses. But of course, there’s a right way and a wrong way.

1. Don’t start with your subscriptions, EVERYONE starts with their subscriptions and I’m willing to be, if you got 100% savings, all your subs are now free, you’d maybe free up 2% of expenses. Obviously if there are some big ones, sure but only the stuff that came up from…

2. Pull all your spending for the last few months (on a cash basis) and sort highest to lowest. Start from the top and work your way down. A lot of the big ones will be harder to flex but see what you can do. Reduce under utilized contractors, find someone to sublet part of your office, renegotiate EVERYTHING you can. Small changes with big things like labor go the farthest. Then task everyone on the team with finding 5-10% in their work they can live without.

3. Consolidate work being done by fixed rate contractors to get them to capacity and let go of the rest. They may be doing things outside their expertise but you just need the work getting done and your team at capacity right now.

Do 20-50% of this list, commit to it over 90 days, and I promise you’ll see your cash available go up. Most importantly - USE IT.

CASH CYCLE

All of this really is to the end of improving our cash cycle. Boosting the money that comes in and bringing it all forward, lowering the amount going out and pushing it back. That is how you get the most amount of cash on hand to work with.

1. Forecasts out DETAILED deposits and expenses for the next 90 days including things like customer payments, annual subscriptions coming due, one time payments like insurance coming up, anything like that. 

2. See if you can move a big annual, semi-annual, or quarterly payments, like software subscriptions, to monthly. You’ll pay more but you won’t have the big cash hit.

3. If you can’t renegotiate pricing, renegotiate terms to get the payment date pushed back.

4. Flex all payment timing, contractors, vendors, etc. back and make sure your payments are scheduled to pay at the end of your terms, not earlier (don’t be late though because you don’t want to lose access to these things when things spool up).

5. Now look at the other side. Look for ways to change your fee structure to get paid more up front. Offer discounts even for early payments or more upfront. Push services that involve one time payments right away and play down things that require you to float the work. Bring the cash deposits on this schedule UP.

6. Dig into collections, what is outstanding and has been neglected a bit. Get those paid, NOW. Go one step further and tighten up your invoicing timing. Invoice right away, follow up as soon as it’s due, stay on top of it and get paid on time. Lastly work out deals with anything that is unlikely to pay or is a long ways off if at all. Cut deals to get what you can in the next week to 90 days to get something for it. If any plan involves payments over the next 3 months and/or a significant reduction, make sure you’re getting at least one payment now. No deals unless it comes with SOMETHING as a show of good faith. Right. Now. 

PRICING

This may sound counter to all the deal cutting above and that’s partially true. I’d say first 30 days is about cutting deals and getting anything close in the door. But over days 31-90 we want to see if we can find ways to increase the prices. Don’t do ALL of these, but see what makes sense and maybe aim for 1 or 2.

1. See if you’re due for a general inflation price update. 2-3% across the board if it’s been a long time. 5% max. The goal isn’t to fundamentally change the price, just update it to reflect the 2-5% drift you’ve probably experienced on the cost side of things.

2. Don’t just raise prices, add value AND increase prices. Figure out where there’s opportunity to add a small amount of time or effort (remember, you have excess capacity right now) and significantly increase the average value per client or product.

3. Add premium versions of things you already do.

4. Add bundles. Again, goal is to increase the value per transaction / customer.

5. Create add ons for the most common requests.

6. Wherever possible avoid a linear price increase. As in Product A previously cost $2500, now it costs $3200. Instead change it up enough there isn’t a comparison. Product A cost $2500, Product B costs $3200 which includes Product A plus new feature X, lifetime access to Y, and is guaranteed in half the time as A. Get creative but find ways to deliver a new offering that earns more AND converts better.

So to summarize. We’re aiming for short term solutions that can do a couple of things.

Increase the volume (growth), make it worth more (pricing), while getting paid sooner (cash cycle), and with less going out (expenses) later (cash cycle).

Do 20-50% of this list, commit to it over 90 days, and I promise you’ll see your cash available go up. Most importantly - USE IT. 

We do this exercise to get more cash on hand so we can fund growth. We need this cash going into things that add growth, improve the product (and either increase prices, decrease churn, add repeat business, or increases referrals), or improve efficiencies. 

Be careful. This doesn’t suddenly make you profitable, that’s a different exercise. Doing this when you’re consistently losing money can end up being like dumping accelerant on a fire. It’s a short term patch and if there’s no solution on the other end, you’re in big trouble. However, if you are profitable and trying to grow but don’t have cash to make the necessary upgrades, this is an effective way to self fund the improvements needed.

Happy cashflowing.

PS We made a checklist for this with detailed instructions. Comment below if you want it and I'll send it to you.