Money

How to Start a Business with Other People’s Money

If your business is growing fast, negative cash flow can be catastrophic. Learn how to fix the problem once and for all.

Your startup will need a lot of cash if you’re paying for stuff before you sell it. If you begin to grow fast, this negative cash flow cycle can cause a catastrophe.

It almost did for technology giant Dell back in the ’90s. Dell used to inventory parts and pay suppliers for the gear it kept on hand to make computers when customers called. The company ran short of cash and almost choked on its own growth.

Galvanized by the near-death experience, Michael Dell himself set out to remake his company’s cash flow by charging customers before buying the bits and bobs needed to build the computers they ordered. By reversing the typical cash cycle, he was able to use his customers’ money to fuel his growth, which meant he required very little external money to grow the business.

Highspot is a small, Toronto-based startup that charges up-front for everything it does. Co-founder Ross Slater explains the company’s payment policy: “In the beginning, the cash flow helped us get started without a lot of financing. Now we see prepayment as a mutual commitment to the success of the relationship we’re creating with our clients. By paying up-front, the client commits to participating in the process, and we commit to providing value and delivering on the trust they have placed in us.”

Wonder how he gets away with it?

Slater explains, “We have a clear, staged process that outlines how we operate and what a client receives. The fees for each stage are right on our website, which filters out the tire-kickers. We invoice immediately, then do what we say we’re going to do. We insist that this is the way we do business. We’ll walk away from a situation where a potential client won’t agree.”

Create a policy for your startup whereby you charge up-front, and your company will be worth more—and a whole lot more fun to run.

Total
0
Shares
Previous Article

Reflections On A Year Of Weight Loss

Next Article

What’s Your Story? How to Get Publicity

Related Posts
venture capital
Read More

Startups and Venture Capital: What Do They Spend Their First Round On?

There are more startups than ever before post-pandemic. As the e-commerce industry continues to boom and work from home remains a trend amongst the corporate sector, more entrepreneurs are using their funds to create new digital startups in a number of niches. However, from staffing to manufacturing, starting a business does not come without its...
wjr business beat
Read More

WJR Business Beat: Grants for Women Entrepreneurs (Episode 347)

On today's Business Beat, Jeff Sloan shares NerdWallet's list of grants specifically for women entrepreneurs. If you're a woman or if you know a woman who wants to start or grow their business, but is in need of capital to get it really rolling, check out these grant opportunities and others. Tune in to the...
business funding
Read More

From VC to DeFi: 6 Realistic Ways to Fund Your Startup in 2022

The world is changing. The status quo is being challenged. Business models are evolving, and the future of finance has never been more promising. There are fantastic rewards to be had for those who know how to exploit the new opportunities for business funding that arise in times like these. And if you're not one...
cryptocurrency
Read More

What is Cryptocurrency and Should Your Business Use It?

Cryptocurrency, also known as crypto, is a type of anonymous digital or virtual currency that, unlike other forms of currency, is not backed by any central authority or government. While the currency is not backed by a traditional source, like the Federal Deposit Insurance Corporation or FDIC, crypto is secure thanks to blockchain, an ongoing,...