It may be a cliche, but it is inescapable. Cashflow is the lifeblood of any company that wants to avoid being the one in two that will fail in their first year.
The key to success for startup companies, more than ever before, is to get funds coming in as soon as possible while, where reasonable, delaying outgoings. This has certainly been the priority for Alesha Keene who set up Alesha's Italian Masterclass last spring. The company offers Italian lessons which are either face-to-face or in groups over lunch at restaurants. From her first day in business, Keene has known conventional invoicing and waiting for a month for payment would leave her struggling.
"I'm very lucky because, by providing a service, I don't have to buy stocks up front like a retailer would, but I still knew I had to be inventive with my pricing," she says.
"I needed to get in money in advance and so I started off from day one offering a 10% discount for people who book a two-month block of lessons and pay up front, a week before their first session. That way I have the funds and they get a discount. I run two-month group courses in an Italian restaurant in Putney and have negotiated with the restaurant owner that he gets paid at the end of the two-month block of lessons. So, I get paid upfront and then put off my biggest expense for two months. It's worked well so far and I'm planning on expanding in the near future."
Continue reading A guide to cashflow management for startups
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Why are people so hung up on not getting money upfront first for a job?
Not suggesting 100% (but would try...) but a reasonable amount. I can't believe some would start a job funding it themselves, where else would this happen except in our trades area.
Is it about time we worried more about our businesses and what is needed to survive ( ie cash ) than some preconceived., outdated methods that suggests you are 'naughty' for trying to get money in first?
I can not think of many other business areas where this is unacceptable - look at article above..
Just a Wednesday morning thought...
It would certainly make life a little less stressful.
Only once in eight years has anyone asked us if we would like a deposit paid upfront, and that was only last October. Naturally we said yes, asked for & got 20% in advance for hedge cutting.
Gary said:
Just a footnote to my comment before anyone comes back on me, I am not suggesting this can be applied for small jobs, like gardening visits etc.
I'm talking here about jobs that need a commitment or a last a day or more, but wouldn't it be good if you could ... Almost like a booking fee to guarantee a specific time/day/date :-) Perhaps it's the salesmen in me .....
At the end of the day we all plan to run money making ( I hope ) businesses....
In my past life I owned a specialist building company. 25% deposit on booking the job, 25% payable at the end of week 1, remainder payable on completion when building control passed the work. most jobs were a 10 day turn around, 95% of materials paid at end of following month so only cost wages paid a week in hand, sub contractors, 2 weeks after invoice. I was never over drawn and always paid on time.
No positive cash flow no business.