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How to manage more with less money

September 28, 2010

A key ingredient to business success is access to adequate capital. However, for new ventures, it is not always easy to get access to bank loans or some kind of equity investment. Hence one has to work with limited personal capital that one might have kept aside for the business venture.  How then, does one stretch one’s limited resources, till the business becomes self-sustaining and attains a stage where one can get access to external funding?

Here are some simple, yet effective techniques to make the rupee  go that extra mile:

  1. Plan for today, not for day-after-tomorrow: The way a start-up needs to look at the future should be different from the way a mid-size company would look at it. As a start-up, while making capital investments in office space, infrastructure etc., plan basically to fully take care of your first year’s needs (as per your business plan) with some room for second year’s growth. Don’t over invest in building large capacities, in the process risking your cash flow and not having enough liquidity on hand should a need arise.
  2. Hire multi-taskers: A start-up requires team members who can do more than one thing. Can the person who manages the accounts also manage the reception? Can the HR person also do admin and if the accountant is absent do some data entry too? Can the marketing manager also double up as a purchase manager when it comes to negotiations? While hiring someone, specifically understand what other job roles can he undertake, should some be absent in the team or if there is a sudden short-term manpower requirement in that department.
  3. Focus on cash flow first and then on profit: Cash flow is like oxygen. However profitable your business may be, if you are not generating enough cash to take care of paying your bills, sooner or later you will get choked. If someone offers you a project which will give you Rs 50,000 profit but payment after 3 months and another person wants the same job done such that it gives you profit of Rs 40,000 but immediate payment, go for the second. Lack of adequate cash flow will give you sleepless nights, eventually draining out all your energy.
  4. Forget style, focus on substance: An office without carpets, a chair that does not rotate, a laptop which is less than state-of-art: all this is absolutely acceptable for a start-up. Identify clearly your key business drivers and invest resources in the same. Put money into good plant and machinery, hiring relevant talent and on-sales promotion. Don’t cut corners on things which will eventually get your success.
  5. Marketing at a low cost: Find intelligent ways of low-cost marketing. Instead of a lot of mass-communication strategies, try to look at word-to-mouth publicity, focused marketing (trade shows, direct mailers) or using referrals. Of course what should be your marketing strategy will finally be a function of your business. But think more in terms of sales rather than in terms of marketing in the early days of business. If you are investing in some marketing, set a target in terms of what sales it should give you and focus on meeting the sales targets.
  6. Less fixed, more variable: Try to keep fixed costs and overheads minimum and see if most of the costs can become variable. Eg, if you have to hire a marketing consultant, pay him a small fixed fee but a larger fee based on sales achieved.
  7. Keep close watch on cash flows: Watch your cash flow like a hawk. A daily/weekly cash flow review is must. Adequate oxygen supply will allow to run a longer race!

Click here to learn the art of managing business efficiently

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One Comment leave one →
  1. Dhriti Patel permalink
    October 29, 2010 11:12 am

    Hey nice tips… really helpful.. Thanks 🙂

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