Financials and Cash Flow

Cash flow through the later stages of the business lifecycle

Explore these tips for managing cash flow as you navigate the later phases of the business lifecycle.

Published: January 18, 2019

1. Growth

  • Prioritize saving cash — three to six months of what you expect to need — for emergencies or slow sales periods.
  • If you plan to hire employees, consider that you may have higher payroll expenses before you can recognize the additional revenue these employees bring in.

2. Expansion

  • If you have substantial cash available, you may be able to use some of it to fund expansion.
  • If you plan to borrow money, know that lenders will expect to see cash flow projections indicating how your increased revenue will enable you to repay a loan.
  • As you increase operating costs, pay attention to your margins. You may be able to negotiate volume discounts from suppliers as your business scales.

3. Maturity

  • Continue to monitor your cash “burn rate.” If too much cash is flowing out, evaluate whether you still need all of the services, equipment, and facilities your business is using.
  • Talk to longtime vendors and suppliers about potentially getting better payment terms.

4. Transition

  • Examine cash flow from the past three to five years and prepare earnings projections for potential buyers.
  • Eliminate any expenses not needed for continuing operations.
  • Factor the tax implications of your exit and business sale into cash flow projections.
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