In times of crisis, cash flow can be the difference between life and death for businesses. This is especially true for startups, which can ill afford to venture too far into the red in their effort to establish a scalable business model.
Fortunately, there are a number of ways that startups can secure cash and even get ahead of the competition during the current crisis.
The pandemic has forced us to relook at our usual ways of working. More than ever, many businesses are learning that office space might no longer be a necessity. Having your staff work from home can save a lot of money, and lead to several advantages.
Studies have shown that employees report higher levels of job satisfaction and are actually more productive when working from home.
Matt Mullenweg, founder of the unicorn startup Automattic – whose brands include WordPress and Tumblr – constantly touts the benefits of remote work, which he prefers to call “distributed work”. Companies that adopt the distributed model can employ people in multiple time zones, which enables them to effectively produce work around the clock. This capability is not available to purely office-based organizations.
While older companies may have already invested huge amounts of money in an office location, startups can take advantage of their smaller size and jump to the distributed work model almost immediately.
Take advantage of loans and tax breaks
Many banks are currently offering special loans with reduced interest rates to help businesses get through the COVID-19 crisis. Moreover, FinTech lenders that work in coordination with banks can provide an additional source of income.
The Thai government is also offering significant tax breaks and deferrals for SMEs.
Startups should carefully explore all of these avenues. Extra cash saved and borrowed can mean the difference between continuing operations and shutting down.
Collect on invoices
These are challenging economic times for everyone – your customers included. But there are thoughtful ways to encourage them to make good on any outstanding debts. Rewards programs and discounts for early payment are two ways to achieve this. Customers will appreciate the breaks you give them, and you’ll be able to collect payments faster. Even at reduced rates, cash in hand is always preferable to outstanding invoices.
Startup founders are usually ambitious, intrepid, and self-sufficient people. But this means they can fall into the trap of trying to do too much by themselves. Finance, marketing, HR, and many other functions can often be better performed by third parties, and at a much lower cost. Outsourcing also allows you to focus on the core activities that actually add value for your customers – an excellent way to gain traction at all times, but especially in the current climate.
The startup advantage
The above ideas are by no means restricted to startups. Larger and older companies can adopt them as well. But startups have an advantage: Change is easier for them. Startups don’t have legacy hierarchies. They don’t have large and expensive offices. While their investors do indeed expect results, they are often less burdened by demands for constant growth than their larger counterparts.
By taking the appropriate steps to shore up cash and optimize processes during the COVID-19 slowdown, startups can not only stay afloat, but also gain a significant competitive advantage.