Since the outbreak of COVID, many businesses have been on a financial rollercoaster. Even though some businesses are beginning to come out of the financial breakdown of the pandemic, others are still struggling. 

Also, the threat of a recession in 2023 has caused a lot of businesses to panic and make urgent changes to avoid bankruptcy. Nevertheless, one of the best ways to prevent your business from collapsing is to prevent the cash runway from burning out. If your business has an excellent financial position, it can survive any storm. Ensuring healthy cash runway is a good strategy to help your organization stay in business for a long time.  

Cash runway explained

Cash runaway is the amount of time a business has to remain solvent. A cash runway is important to sustain the lifespan of a startup business. Simply put, “cash runway” is the amount of money a business has until it runs out of money. One of the things that creates a cash runway is when your spending exceeds what comes in. In other words, if your revenue starts declining, your cash runway will burn out fast. 

Tips to keep a healthy cash runway

To keep your cash runway healthy, there are some very important things you need to do. Furthermore, to learn how to keep your cash runway healthy, follow these tips:

Reduce cash burn 

Before you reduce your cash burn, you need to understand how your cash is utilized by your business. Without this understanding, reducing your spending may affect your business negatively. Keep a close eye on your cash position, and your spending practices need to be monitored. Also, this will help you stay in business when your business faces existential downtime. 

Block revenue leakages

Don’t wait till you start having financial issues to block revenue leakages. You need to put strategic measures in place to ensure all your profits are utilized. One of the actions that causes revenue leakages in businesses is improper receivable management. If you are using manual receivable management, you can automate it to get more results. Therefore, invest in an automated receivable management process to block leakages. It will reduce payment failures and so on.

Retain existing customers

According to marketing experts, it costs 6x more to get a new customer than to retain an existing one. But it is even more difficult when there is an economic shutdown to keep customers coming back to purchase your products or hire your services. To keep your customers loyal to your business, you need to strengthen your relationship with them. Examine the customer’s cancellation experiences and find out why they did. Also, you need viable customer support to inspire more confidence in your business. 

Innovate and think outside the box

Another way to ensure your business has a healthy cash runway is to think outside the box and create new ideas. The first innovative way some businesses think of cutting expenditures. Even though cutting expenses is fine, it may not be the best option. Search for new ways to demonstrate to your customers that you offer value for money. Experiment with a new pricing structure and create new services. Make sure that the innovative ways you think of generating cash are a win-win situation. 

Replanning and forecasting

Businesses that have survived over the years have learned to embrace uncertainty. Planning for the good days without projecting that bad days may be ahead is not good planning. Plan to the right and also to the left. You need to map out some of the worst scenarios that can play out while you are carrying out your business. Outline the good, bad, and ugly. After outlining these possible problems, start putting things in place to help your business survive. Remember to keep all the possible solutions to the likely problems that may arise a business secret. 

Conclusion

No business can survive if it doesn’t have an effective plan for the unexpected. Businesses that have lasted decades always have a plan for unforeseen situations. Keeping a healthy cash runway is a good way to ensure your business is sustainable. Finally, a good financial adviser would provide more tips to keep your cash runway healthy.