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As founders, we know that one of the biggest challenges is getting funding. Entrepreneurs who are newer to the business (and even those who are veterans) tend to focus on raising capital and getting investments as the only or best way to get the funding they need. This is definitely the most attractive route on the surface because it is an easier way to get larger amounts of money faster. But as I tell my students at Columbia University in an entrepreneurship course I teach — raising capital from investors as your primary source of funding comes with many challenges of its own, and it puts all your eggs in one basket.
Most of the time, founders come to me because they’re stuck in a bad situation of constantly raising to stay afloat. They have working capital raises, or they often raise to cover expenses, and they don’t seem to have the ideal 12 months of runway they need to feel relief — and they’re burned out in the process. Nothing makes me happier than working with founders at the beginning of their journey before they start scaling, because we have the ability to create a strategy that helps avoid this type of scenario with a strong funding and growth strategy. But for many, we can’t turn back time and have to solve the problem of how to get out of the spending rut as fast as the money comes. For this founder, the question becomes more about how they can gain more runway. And that’s a question I’m seeing a new wave of desperation as new founders enter the startup space.
The short answer is that there is no one answer. We diversify our personal investment portfolios in the stock market and should do the same to generate sustainable funding for our business to get out of the hole. Your revenue model should take a diversified approach to generating more traffic, and I’ll cover five methods in this article.
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1. Raising more funds from investors
Let’s eliminate the most talked about option — raising more capital. Sure, you can raise more capital through equity or debt financing, but if you’re already doing that and struggling to build more runway, I’d recommend reading on. Continuing to raise more capital as your primary focus puts you in a position to run out of equity, which will make it difficult to attract investors after a certain point.
2. Optimize cash flow management
One of the most overlooked ways to stabilize your burn rate seems to be the most obvious. Cutting costs by cutting unnecessary expenses and optimizing cash flow management is one of the best ways to generate more routes. They teach us as startups that we need to spend to grow. While this is true to an extent, it is also reckless. If you spend without a plan for this expense, then you are just burning money pointlessly without a clear goal. Creating a clear roadmap will help you prioritize expenses for each stage of development to hit key milestones and inflection points so you can better accelerate your cash flow. Cutting costs doesn’t always mean a complete cut. Instead, it could mean that it’s a phase-out that a clear plan will help you outline.
3. Grow revenue strategically
Simply put, go back to the drawing board on pricing, customers and offers. More often than not, I see missed opportunities to reposition the product in new markets to increase revenue. Or worse, I see early stage founders just ramping up without a revenue plan in place. (Yes!) Expanding your customer base, improving your pricing strategy, and launching a new product or service could be an answer to generating more traffic. What I don’t recommend is spending more money to build something new here. Instead, I suggest you look at how you can scale your existing supply to create new demand for it. I will typically work through a profitability audit with my clients to identify the most appropriate products for this to ensure we are working smarter, not harder.
Related: A secret to achieving rapid revenue growth and profitability without VC funding
4. Improving operational efficiency
Again, this seems too easy. Improving your operational efficiency will not only impress your investors and give them confidence in your ability to grow a business, but it will also be one of the most effective strategies you can implement. Something I often hear from founders is that they are too early in their development to think about this. But again, they find themselves running out of cash each month and struggling to keep up. Operational efficiency, simply put, is not optional. A great way to approach this is to look for ways you can automate processes and streamline operations in six key business areas.
5. Create strategic partnerships
One of the most underrated approaches to generating more traffic is to get creative with your business needs. Working with other companies for mutually beneficial partnerships and strategic alliances can help you reduce costs, expand reach and enhance efficiency.
It can’t be said enough that none of these trails will solve your treadmill challenges. You’ll want to use a combination of these approaches as the most effective way to earn more runways and hit that minimum 12 month goal. It’s worth noting that it doesn’t come flying by the seat of your pants. Having a roadmap for how you will implement these strategies can make all the difference. We remind you that most startups fail because they don’t have a strategy. While many in the space will tell you that you don’t need a strategy, many others will tell you that you do if you want to survive. Your strategy will help you create a roadmap for how you will win the runway while continuing to grow and meet key milestones.
Related: The 10 most reliable ways to fund a startup