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Startup Year One: 3 tips for optimizing start-up cash flow

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Profits are the difference between a successful business and a failed business. Just think about that. There are a lot of tips on how not to fail during the first year, or to last up to the five year mark. However, all these tips boil down to whether your profits exceed your expenses. In other words, your cash flow.

The extent to which these profits exceed expenses will determine your real success. The profits allow you to go further for customers. They allow you to buy better equipment, to move to a better facility. The profits allow you to expand and open the door to get even more profits.

Here are 3 tips to maximize your start-up cash flow during the first year:

1. Become a number cruncher – the cash flow is king!

It rarely takes a year for many customers to come to your door. That is, if you have a good marketing strategy that conveys your message to customers where they are coming out. First of all, you need to make sure that your monthly cash flow matches the terms set by your landlord, your suppliers and your other creditors. This means that you set your payment terms with customers to make sure money arrives before you have to pay your bills. Then, you must constantly analyze your pricing strategy to determine if there are price differentials – lower or higher than yours – that you can leverage to increase your cash flow by reducing or increasing yours to increase your sales . Offering prepayment incentives with customers is also a good way to get more money, even if it costs you a little in lost profits.

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2. Always look for ways to boost credit – dig a well BEFORE being thirsty!

The advice in the title is as pure and simple as possible. It's hard to start a thriving business if you do not have an iota of credit to tap when cash reserves dry up. This means that you have to pay your debts on time and that you take a credit when it is offered to you – even if it's a high interest credit. A disciplined business owner will use the credit when needed – such as when there is overlap between having creditors' money and receiving it from customers – then paying it off as soon as possible to avoid the interest charges. If you do not have good credit, consider putting money aside and getting a prepaid card. Credit is also essential to preserve net working capital during lean times.

3. Focus on a referral-oriented marketing strategy for the best results of the first year.

The big problem with marketing is that it usually costs a lot of money to get customers in the beginning. This does not mean that marketing necessarily becomes cheaper as you go; just that a startup with few funds will find that it is even harder to put money aside for customer acquisition. It's there that focusing on getting as many references as possible can literally pay a lot of time. Go above and beyond for each customer, no matter how much it can hurt you to do it. An extra hour spent doing these little extras will arouse the interest of the customers for what you are offering, especially if the competition refuses to do so. And – big ET customers will be much more likely to rave about you to others when they know you are ready to put in extra effort. This is because you add value and the customer has the impression of having more than what he has paid.

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As the saying goes "more money, more money". The more you have, the more you will earn. There are indeed many things that a CEO needs to know to start a successful business. A large bank account and sufficient credit (that is, cash) are the ultimate goal of any survival in first year and beyond.

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