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Lydia Stone has over 20 years of experience building and leading accounting organizations. She managed all public company accounting operations, including IPOs, primary and secondary financial transactions, M&A, and accounting, financial reporting, taxation, treasury, financial systems, and audit functions.
Stone used to blackboard When evolent health, and various leadership roles BAE system When Ernst & Young LLP. She currently serves as Chief Accounting Officer. Charge Bee.
Here are five ways to extend your cache runway.
For small or relatively new businesses with low cash reserves, slowdowns can be a concern. Businesses must continually plan for the long term and anticipate possible recessions. When a recession becomes a reality, businesses will need to plan and respond carefully to ensure they don’t lose sight of their long-term goals.
The word recession instantly tightens the purse strings. Thrift is wise in the current situation, but staying aware of the big picture is essential.
Extending the cash runway is not just about cutting non-essential spending, it’s also a strategic exercise. You want to lose fat without compromising the revenue engine that drives sustainable growth.
Experiment, innovate, and get noticed.
Ideally, you should have a runway at least 24 months ahead. Here are some ways to extend your cache runway.
It’s easy to think of it as “cutting spending”, but there are many companies that have not only survived but thrived by thinking outside the box in less-than-ideal macroeconomic conditions. What other ways to generate revenue?
What channels didn’t you pay attention to when the mainstream channels kept you busy? Are there additional or different customer segments, geographies, industries or demographics available? Can you meet new market demands by simply making changes? For example, during Covid, apparel companies such as Nike have launched slightly different apparel lines designed for telecommuters. Uber, a taxi business that transports people, has become a food delivery business. A small tweak has created a new multi-billion dollar business line. Brainstorm new ideas with employees and advisors.
There are other ways to drive new sales without drastically lowering prices. If you don’t have one, consider providing one. Product or service subscription modelOpen up new customer segments by lowering the barrier to entry and letting them try your product with a free trial.
If you already have a subscription model, consider re-evaluating your pricing model. Continuous price optimization has been proven to accelerate growth trajectories over the months. There may be better ways to monetize your product.The tech stack that makes running possible price experiment Painlessness is a necessity for scale-up companies.
The relationship between a customer and a business is a function of “perceived value”. Usage-based billing is emerging as a strategic pricing method that capitalizes on this sentiment. By 2023, SaaS companies are expected to adopt usage-based billing at 56%.
infrastructure support. You should be able to break your service into measurable chunks and identify the value metrics (billable usage) and technical stacks that support your operations. These efforts can bring high dividends. Pay only for what you use gives your brand transparency and credibility.
it takes 6 to 7 times Acquiring new customers is more important than retaining existing ones. On average, it makes sense to focus on retention. In times of crisis, turning your attention to bolstering your retention game is a no-brainer. Improving retention rates also has a compounding effect on increasing revenue. Just a 5% increase in retention leads to a 25% increase in profit.
Survival mode makes it harder to convince people to make new purchases. The cost of acquiring new customers increases significantly. Focusing on maintaining and strengthening relationships with existing customers is critical.
to build churn deflection funnel With an intelligent cancellation experience, you can understand why your customers are canceling and offer the right solutions to retain them.
Every penny counts in uncertain times. A key step in maximizing cash flow is closing revenue leaks in the billing process. Poor receivables management, either manually or through ineffective automation, can quickly leave a huge hole in your balance sheet.intellectual
A dunning system can significantly reduce payment failures and involuntary cancellations.
investment in Integrated billing and receivables system By automating the entire AR workflow, you can reduce collection costs without compromising the end-user experience.
People advise to prepare for uncertainty, but no one could have predicted the Covid-19 pandemic was coming. Despite the occasional reality check on the illusion of control, scenario planning is a reliable way to mitigate risks and identify potential outcomes and how an organization might respond to them.
Plan out all the plausible scenarios (good, bad, ugly) that might unfold and determine your financial and operational readiness. What if your cost of acquisition (CAC) triples as inflation rises? How long can you sustain negative net customer numbers? What if there is an unexpected increase in demand? Can you forecast potential revenue targets and estimate cash flows for all scenarios?
Scenario planning helps you understand how your company will survive and thrive in different economic scenarios. You probably don’t need fancy recovery curves, but having a scenario matrix with precise internal and external triggers will help clarify which path to choose.
Scenario planning can be an effective financial tool that enables you to act quickly and decisively in times of crisis.
A subscription business has several moving parts, from product and marketing to sales and finance. All these moving parts need constant monitoring to maintain the health of your business. Analytics tools that can integrate data from multiple functions to provide a consistent view of your business add significant value to your tech stack.
Real-time insights serve as key indicators of business health. In the short term, the AR aging report can predict cash flow for the month, and the churn dashboard gives you a complete picture of retention patterns and customer health.
Equally important is empowering employees to skillfully interpret reports and approach dashboards with an insight-driven approach. Long after embracing the ubiquity of data and advocating for data-driven decision-making within organizations, efforts to improve employee data literacy have fallen short.a Tableau study found that investing in data literacy yields tangible business benefits.
Combining data literacy with the right tech stack can create a powerful competitive advantage.
Unless you have a fairy godmother or a deep-pocketed investor backing you up, you’re out of business if you’re short on cash. In a climate characterized by rising interest rates, companies may struggle cash flow. Macro factors remain unpredictable, but a relentless focus must be placed on ensuring well-thought-out strategies and comfortable cash runways for businesses to survive turbulence, thrive, and return to sunny skies again.
