Situation: A CEO closely watches company cash flow so assure that it is enough to fund the company during both upswings and downturns. The company is doing well, but the CEO is concerned about a near-term potential downturn. Where so you find sources of capital or savings?

Advice from the CEOs:

• In anticipating future cash flow needs, planning to breakeven may not be enough. Anticipate contingencies and cut enough to be profitable. This is particularly true if a downturn is longer than anticipated.
• Take a close look at operating capacity.
  • Estimate current capacity based on staff count and average billing rates.
  • Forecast best – worst case scenarios given market trends. Compare each against current capacity and evaluate the gaps. This will help set staffing levels to assure that the company is not overcommitted in case of a downturn.
• Discount future cash flow for non-payables based on experience. This may indicate the need to cut expenses deeper to assure that the company survives an extended downturn.
  • In a recovery, pull back those who were let go.
• If there is underutilized time from the team, pitch this to investors to obtain equity financing for new IP.
• Consider selling a key customer on a royalty model. This can be a small royalty – maybe 1-2% of products sold based on the company’s contribution.  This is pure profit to the company, and provides an annuity revenue stream, even if small.
• Look at banks which are aggressively expanding in the region. If they are hungry for new clients they will offer attractive rates.
• Companies are better sources of funding than investors. A good client can become a strategic partner. Do some homework before first before making the call to a key contact.
  • Know the level of financing that is needed.
  • Know where it would be used and what kind of return the company can yield on the investment.

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