10 Strategies for Surviving a Cash Flow Slump

cash flow slump

Maybe you haven’t had the earnings you projected you would this year. Maybe some key invoices are still unpaid and you’re getting panicky.

Fear not — you’re not alone.

To learn how to navigate a cash-flow slump, we asked 10 entrepreneurs from the Young Entrepreneur Council (YEC) the following:

“What’s one strategy you used successfully this year to get through a cash flow slump?”

Here’s what YEC community members had to say:

1. Stay Motivated

“You need to be at your best when times are tough. Odds are that a solution to your problem will require a lot of creativity, communication and encouragement. Staying motivated while still being honest is a must if you’re trying to get to greener pastures. ” ~ Tyler Arnold, SimplySocial Inc.

2. Defer Founders’ Compensation

“In the past year, we had to ramp up our team, office and many other aspects of our business prior to landing the accounts that would pay for these costly improvements. My business partner and I gave up our compensation temporarily to make this easier on the company. We knew that the company would more than pay us back in the long run.” ~ Brennan White, Watchtower

3. Offer Annual Discounts

“If you’re struggling with cash flow and you charge customers monthly, try offering a one-month discount for them to pay a year in advance. This will give you a huge cash inflow today rather than spacing out your cash flow during the full year.” ~ Wade Foster, Zapier

4. Get Credit

“Get a line of credit when you don’t need one so that you have it when you do. The best move we made with my former company was to get a line of credit when cash flow was good. The rate on a line is low prime plus one or two, and it’s as good as cash, which is crucial when it comes to paying employees or contractors who won’t take payment via credit card.” ~ Enrico Palmerino, SmartBooks

5. Eliminate Unnecessary Expenses

“How many $9.99 per month subscriptions do you have for technology products that also offer free versions? Comb through the bank statements, identify the reoccurring expenses that don’t drive value and eliminate them. Doing away with the cash flow negatives can help give a slump a much-needed positive. ” ~ Brett Farmiloe, Internet Marketing Company

6. Re-Engage Customers

“Believe it or not, 75 percent or so of your customers don’t stop doing business with you because they are unhappy with your product or service. Rather, they stop because you have inadvertently ignored them. By simply reaching out to your disengaged customer base with an engaging marketing letter, three-step sequence and compelling offer, you should see an instant surge in sales and cash flow.” ~ Charles Gaudet, Predictable Profits

7. Consolidate Vendors

“We earned considerable discounts by consolidating all of our steel purchases through a single vendor and buying at higher volume. We now look to bundle whenever possible and not just for bread-and-butter items (we’ve even bought headsets in bulk).” ~ Sam Saxton, Salter Spiral Stair and Mylen Stairs

8. Restructure Salaries

“If your startup is experiencing a cash flow slump, consider restructuring salaries to be a lower base with a higher bonus or commission payout. By making bonuses attractive at a profitable company, you will incentivize your employees to meet goals, focus on the company’s success and decrease your expenses.” ~ Adam Root, Hiplogiq

9. Include Side Projects

“I’m not a big fan of deterring focus, but I found that we had an easier time picking up occasional side projects for extra cash than pitching investors. Our company is generating revenue, so these small amounts of extra revenue made a big difference and enabled us to get through tough periods without layoffs.” ~ Carlo Cisco, FoodFan

10. Ask for Up-Front Payments

“We used to require our customers to pay in full after we completed our party rental services. Then one day, someone suggested that since our products were so popular, we ask for the full payment up front. We barely noticed a difference in orders coming in and now have a steady flow of cash to invest in new products.” ~ Robert De Los Santos, Sky High Party Rentals

Money Problems Photo via Shutterstock

The Young Entrepreneur Council The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.