In our series Selfmade U, we’ll tackle the most common questions and pain points that come up for business owners with tips and tricks from Selfmade, a virtual business coaching program, founded by Brit + Co founder Brit Morin and sponsored by Office Depot OfficeMax. We’ll hear from Selfmade members and business coaches on what it takes to run a successful business and make it as an entrepreneur.
Creativity drives our passion but optimizing cash flow is what makes a small business succeed. According to a U.S. Bank study, 82 percent of businesses fail because owners didn’t manage cash flow properly, or didn’t understand how cash flow works.
“Cash flow refers to the money going in and out of your business, including the cash that comes from sales, investments, and loans as well as the cash that goes out to pay expenses, suppliers, and lenders,” says Selfmade coach Bex Moxley in her workshop Optimizing Cash Flow as a Small Business Owner. “It is not your profit. It’s not about the value or worth of your business. It’s literally managing the day to day money aspect of your business.”
When Imani Schectman decided to leave her career in arts and education to become a full-time artist in New York City, she found it difficult to access startup resources and secure capital. “There was no centralized location, physically and virtually, where businesses could sell their products and services, access resources, and be a part of a supportive community,” she says.
Imani decided to build one herself. After a successful pop-up event connecting BIPOC artists and entrepreneurs, she found that she was on to something and launched Open Market in 2020. Open Market is a socially responsible marketplace that supports BIPOC creative founders, “making it easy for customers to find brands that align with the initiatives they care about, like social justice, equity, sustainability, and renewable wages,” says Imani.
Imani received an Office Depot OfficeMax scholarship to Selfmade to help her expand her community and grow Open Market. “I think it’s great to have one-on-one time with the Selfmade coaches and ask targeted questions to someone who has business knowledge,” she says. “I appreciate the vulnerability and transparency within the Selfmade community.”
Imani has the challenge of ensuring Open Market is successful while uplifting the more than 25 brands in her community. “I’ve had to be very scrappy and I’ve had to ask for things,” she says. Securing grants, getting involved in accelerators, and applying for scholarships like the Office Depot scholarship to Selfmade has helped her build her business sustainably.
“It’s important to me that Open Market is not about me getting rich quick,” says Imani. “It's really about the community. I want this to be a solution for business owners, especially founders of color, who generally don't have access to capital.”
Here are seven tips for optimizing your cash flow as a business owner:
1. Create a Cash Flow Statement: This financial statement tracks the movement of cash in and out of your business. “You don’t have to have big fancy spreadsheets like a massive company. You can make it small and usable for you,” says Moxley. Moxley suggests tracking monthly or quarterly. “This is about really staying on top of it. You may realize you don’t need some expenses, for example, subscriptions. It really helps to look at those costs.”
2. Make It Easier to Pay You: Make the most of cash flow management tools and digital payment systems that allows customers to make online payments easily, and offer incentives for paying early. Make sure to send invoices on time and follow up on overdue payments too.
3. Negotiate Payment Terms: Build relationships with suppliers and ask if longer payment terms are possible. Take advantage of vendor discounts for early payments too.
4. Avoid Overstocking and Understocking: Get a good sense of customer demand by tracking slow- and fast-moving inventory. You’ll reduce your carrying costs if your inventory is managed more accurately.
5. Keep Expenses Under Control: Regularly check in on your business expenses and find areas where you can reduce costs without skimping on quality. Look for cost-saving opportunities like renegotiating with suppliers or exploring alternative vendors.
6. Create an Emergency Fund: Build a cash reserve to buffer against unexpected expenses or slow seasons. Set aside a portion of your profits to ensure you have a financial cushion when times are lean.
7. Explore Financing Options: This could include business lines of credit or small business loans. Look at the terms, interest rates, and fees associated with each option to choose the one that works best for your business.
“I think it’s important for founders to say, it won’t always be like this. I won’t always have to be scrappy and lean,” says Imani. “But right now, we’re building the business and it’s important to keep cash flow coming in.”
Imani was the third place pitch winner in the Selfmade’s spring 2023 pitch competition, where she earned a $2,000 Office Depot® OfficeMax® merchandise card to help her build business. “So far, I’ve purchased an Epson EcoTank printer because one of our pillars is sustainability.”
Imani uses the printer to print out marketing materials for pop-up events like one she had this summer for Juneteenth. “For the most part we’ve been grassroots, sweat equity, telling everyone, going everywhere, posting, and using our vendors as influencers. I had one person reach out to me about printing and because I had my EcoTank I was like ‘Absolutely.’ I can help.”
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Illustrated by Daniela Jordan-Villaveces
Getting the word out about your business can help solve some of your cash flow problems. With each new customer, there’s the potential for new and repeat sales. Make a good first impression with business cards & build the business pitch of your dreams with custom presentations. Office Depot OfficeMax can help you organize & save time with a suite of business services & solutions to help you accomplish more.
