Cash flow is one of the most important aspects of business; it must be paid attention to carefully. Overspending results in the obvious: not being able to continue operations. Under-spending can result in missing out on opportunities and competitors gaining market share. Although developing in depth cash flow projections can be helpful, it is more important to simply get an understanding of how much cash is coming in and going out and when.
How do you balance investment in growth and sustaining operations? We recently caught up with Jason Weisenthal, CEO of WallMonkeys, an e-commerce website that sells custom wall decals. According to Jason, the biggest challenges that WallMonkeys has faced are implementing improvements to their website and hiring talent.
It is “…a constant struggle to implement the improvements and changes we dream up onto our e-commerce platform fast enough,” Jason said. Companies want to implement new ideas quickly.
Hiring is also a challenge according to Jason, “as we grow, it has been difficult to identify the best people to join our team and help us achieve our goals.” A great hire will make a significant positive impact on the company while a mediocre or even bad hire can hinder progress.
Founded in 2008, WallMonkeys is an e-commerce site offering over 20 million searchable images, covering virtually every category and niche, as well as print custom removable decals from images, logos, or designs.
How do you increase growth while focusing on cash flow?
One of the initial signs of traction for a new company is paying customers. For most entrepreneurs, reaching the first million dollars in revenue is one of the hardest milestones (if they get that far). The first million means that the company, despite being a new player, has been able to persuade buyers of its value.
We recently connected with Ben Baldwin, Founder of ClearFit, a hiring platform designed to help small and medium-sized businesses quickly and easily find applicants and make better hiring decisions. “The greatest challenge in reaching our first $1M in revenue was picking who we wanted that revenue from (target customers, versus simply being opportunistic) and when we receive it (cash flow),” Ben said.
ClearFit, like many other companies, wants to be strategic and balance building a lasting customer base with collecting revenue to support operations. It is tempting to work with any customer that comes along. Learning when to say no to a prospect is important.
Ben notes “It’s hard to get both right…sometimes a business’ first revenue comes from customers that may not be great long-term customers — it’s hard not to fall for revenue growth from the wrong customers.”
At the end of the day, all businesses need to collect money from customers and it is important to make sure that payment terms are fair. According to Ben, “…it’s still important to consider when you are actually getting the money in your bank — cash is king.”
How would you get the first million?
It is no secret that launching a company is a lot of work and that most new companies fail. Every situation is different and it can be difficult to identify what elements help or hinder the success of a new company. What helped Kelly Olexa, the CEO and Founder of FitFluential, was leveraging her 15+ years of sales and business development experience.
Sales is a skill that comes naturally to some and needs to be learned by others. It is a must, however, for a founder and owner of a company. A founder who is unable to sell will struggle to gain traction.
FitFluential, founded in 2011, is a community of fitness enthusiasts sharing their fitness journey both online and offline through social media. Kelly has always taken the approach of developing long-term relationships, rather than focusing on an immediate sale. By leveraging her relationship based approach, Kelly has built up her network, from which she receives references and recommendations. References and recommendations only come with time investment and cannot be bought through PR or marketing.
“Everything has to be a win-win-win. Win for the client, win for me, win for the consumers that see the end result. “ Kelly says. She focuses on the client first, which builds a long term relationship. “Do the right thing up front to help the client sell, then provide the best customer as possible, and know that you must always earn the business.”
How can you improve your sales techniques?
If you read TechCrunch, PandoDaily and most other startup news sites you will find many articles on companies who have raised VC money. There are, however, many founders who choose to build their company without outside investment.
We recently caught up with Rob Farrow, CEO and Co-Founder of Aisle Planner, wedding planning software that connects wedding professionals and couples planning their wedding via rich media and interactive wedding planning tools. Rob explained that Aisle Planner decided to bootstrap for a few main reasons:
Commitment. “We felt that we had no business asking for other people to invest in us unless we were willing to put our own money in to deliver a viable, sustainable business to market first and we wanted to be 100% committed.” With over 15 years in the industry, Rob and his Co-founder were intimate with the pain points and knew how they wanted to solve them.
Focus. Raising money is a time consuming process: founders must devote time to prepare presentations, meet with prospective investors and nurture relationships. Aisle Planner’s agile development schedule was prioritized over this distraction. According to Rob, “we view our business as a marathon not a sprint, and if we went for the fast dime, we would loose the dollar. “ Aisle Planner kept their burn rate low, enabling them to save money and stretch their dollars.
Control. Investors often times get a board seat and have a lot of influence over the company. By bootstrapping Aisle Planner was able to keep control over the aspects that were most important to them, “which is critical when it comes to attracting top tier talent and building a solid authentic rapport with our customers,” said Rob.
Aisle Planner’s decisions have paid off: they recently hit major milestones in revenue and customers, which has triggered the next phase of development and expansion.
What would you prioritize if you were to bootstrap a business?