7 Levers to Extend your Cash Runway ⦨ Mastering Cash Flow: The 7 Levers for Prolonged Financial Resilience ⦨ Midstage Institute

7 Levers to Extend your Cash Runway

Is the cash in your business cycling fast enough to keep you afloat even in the bad times?

Is Your Cash Cycle Fast Enough

In the dynamic world of business, maintaining a healthy cash runway is akin to ensuring the engine of your enterprise remains well-fueled, especially in challenging times. The ability to cycle cash efficiently is a strategic advantage that can keep your business afloat and resilient. In this article, we explore the seven levers integral to extending your cash runway, forming a crucial part of our comprehensive FastAtScale™ model.

Here are the seven questions, that we look at in our FastAtScale™ assessment:

  1. Are your revenues both predictable and repeatable? Predictable & Repeatable Revenues The heartbeat of a resilient cash runway is predictable and repeatable revenues. Are your revenues both predictable and repeatable? Creating a stable revenue stream ensures that your business can navigate uncertainties and plan for sustainable growth.

  2. Do you have a stable ratio between the product labor in your company and the gross margins? Stable Product Labor Efficiency Efficiency in product labor is a key determinant of cash cycling speed. Do you maintain a stable ratio between product labor and gross margins? Balancing this ratio ensures that your operational costs align with revenue, contributing to a stable cash cycle.

  3. Do you also have a stable ratio between all the sales and management labor in your company and your operating margins. Stable Management Efficiency Ratio Managing costs is equally critical, especially concerning sales and management labor. Do you maintain a stable ratio between all sales and management labor and operating margins? This stability ensures that your cost structure is optimized, contributing to a resilient cash runway.

  4. Are the issues in your business getting solved faster and faster? Improving Median Throughput Times Speed is of the essence in cash cycling. Are issues in your business getting solved faster and faster? Continuous improvement in issue resolution times accelerates the cash cycle, providing agility in responding to market dynamics.

  5. Are they getting solved at a lower and lower cost per issue? Improving Median Cost Per Item Efficiency in issue resolution extends beyond speed; it also involves cost-effectiveness. Are issues getting solved at a lower and lower cost per item? Optimizing the cost per issue ensures that your operational efficiency aligns with financial sustainability.

  6. Do you have one map that fits together all the key processes in your company? Mapped Flow of Key Processes Clarity in key processes is foundational for efficient cash cycling. Do you have one map that fits together all the key processes in your company? A comprehensive map ensures that processes are streamlined, minimizing bottlenecks and enhancing cash flow.

  7. When you talk to investors, do you get offers of continuously increasing valuation? Continuously Increasing Valuation Investor confidence is a powerful driver of cash runway extension. When you talk to investors, do you get offers of continuously increasing valuation? A positive valuation trend not only attracts investment but also reflects the market’s confidence in your business, providing additional financial resilience.

In conclusion, cash is the lifeblood of business, and extending your cash runway is a strategic imperative. By addressing these seven levers comprehensively, organizations can create a financial foundation that not only weathers uncertainties but also propels sustainable growth.

Cash is just one of the eleven themes in our full FastAtScale™ assessment.

Take the test for your own scaleup by sending an email to fastatscale@midstage.org. Fast at Scale Healthcheck