Cash: How to keep it, how to get it when the flow slows to a trickle

New Hope Network is excited to be partnering with TIG Brands on our first workshop for Natural Products Business School. Each month, Elliot Begoun will lead a 60-minute workshop guiding brands on relevant topics to help their businesses. This month, we'll explore how businesses can use DE&I and ESG to do good in the world—and do well, as consumers, retailers and investors expect to see these initiatives from brands they support. We'll also offer a 30-minute special focused on cash flow and financing. Register here for Natural Products Business School–Be the Change You Want to See, which is scheduled for 1 p.m. ET on Tuesday, April 18.

Founders of brands that are below $5 million in revenue are likely to experience night terrors due to their cash situation. At the end of this article, I will suggest alternative structures and terms that might appeal more to investors in this current economic climate. For now, I want to concentrate on the steps entrepreneurs can take to keep their cash and get more from sources in their control.

Let me start with this simple but important statement: Growth is the most voracious cash consumer. If you don't have dollars in the bank, the very first thing you must do is to put profit before growth and cash before everything. You'll hurl yourself toward the cliff's edge if you don't. That might require you to say "not now" to a new retailer or to turn off paid social.

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Every new revenue dollar requires more dollars in front of it to fund inventory, receivables, deductions, etc. Review your pricing. You can't afford to subsidize targeted retail price points if you don't have the dollars to back it up. Increase your prices if you have to. Yes, it might slow velocities. It might even get you discontinued in some outlets, but survival is more important. It is no different than if you were driving down the highway about to run out of gas: You pull over.

Once you've slowed your growth, focus on your spending. If you have any loans, call the lender and ask for better terms. The worst they can say is "no," but most will make some accommodations. Your subsequent calls are to your vendors, asking them for better terms or at least to work with you in the near term. They may also be dealing with cash flow issues, so be understanding. Cut all discretionary spending, regardless of how hard it is. This is not the time to confuse being nice—stringing them along—with being kind—being honest, so they can take the steps they need to replace the revenue. The latter is the right course of action.

I want to make two cautionary points. Don't slow pay vendors or service providers without communicating with them. It doesn't make for good partnerships. They likely will be less flexible if you treat them in this fashion. Tell them what is going on.

The second cautionary point is that not all spending is the same. Now is not the time to cut those who are best able to advise you and help you navigate the situation. Take the advice above and talk to them. Your trusted advisors and coaches aren't your saviors, they're your shepherds, and you need them right now.

Now, let's move on to how you can get some cash.

Starting with what you control, let's look at your locked box. You might have some money in your business, just sitting on a shelf locked in a box. Grab your balance sheet. How many dollars of finished goods inventory do you have? If you have more than a bit of safety stock, it is time to convert it into cash. The depth of your offer is dependent on your cash situation. The more dire, the bigger the discount. Remember, the cash to make it has already been spent. Think of it as similar to pulling money early from your 401k. You'll pay the penalty for early withdrawal determined by how much and how soon you need it. Consider a flash sale on your website or Amazon. Reach out to retailers like Grocery Outlet with an aggressive offer. Be creative. Since many of you have your product co-packed and deal with high minimum order quantities, this could be a significant source of cash.

There is also the possibility of financing inventory, receivables and POs. That financing depends on many factors, but I encourage you to contact asset-based lenders and some fintech companies. It might be out of reach, but it's worth the time and effort.

I am wrapping up. I wrote a recent article on funding the 99%. Read it. The reality of the current macroeconomic climate is making it harder to find early money. Show up to your investors with a different plan—a plan that does not require an exit for them to see a return.

I understand things are scary, but I see it as a blessing, not a curse. The market is permitting you to recalibrate. A few years ago, a founder putting profit before growth and cash before everything would seem strange. Today, it seems brilliant.

Please reach out to me if I can be of assistance. I know times are tough. I want to help you through these challenges.

Elliot Begoun is a 30-year industry veteran, author, podcast host, founder of TIG Brands and champion of Tardigrades. TIG Brands supports a community of entrepreneurs interested in building nimble, capital-efficient, resilient brands that become Tardigrades, not Unicorns. Learn more about TIG Brands’ programs.