Why operational flexibility is a cash-flow win?
If you own a business, 90% of your headaches are caused by cash flow.
| ● 82% of (small) businesses fail due to cash flow issues. – Entrepreneurs HQ / Score ● 60% of small business owners say they struggle to pay operating expenses (e.g., rent, payroll, inventory, etc.) due to cash flow shortages. – U.S. Bank |
You’re chasing clients who owe you money, scrambling to cover everyone’s paycheck, trying to pay all your bills, and then, there’s a short moment where everything feels steady and calm. Not for long, though, because that’s exactly when unexpected expenses like to surprise you.
It’s not that your business isn’t profitable; it’s just that money never seems to be in the right place at the right time.
Why? Well, there are a lot of reasons, but one of them is that a lot of companies are very rigid about how they run their operations. Some buy all equipment outright, others lock into long leases, hire more staff than they need, rent out more space than they can afford… IT all feels safe in the moment, but in the long run, it ties up cash and makes the business slow to react when the market changes.
If you want to stay ahead of this, you need a different approach.
How to keep costs in line with reality
One of the biggest mistakes you can make is locking your business into costs that don’t match the way money actually comes in.
Although buying equipment outright or signing long leases seems like a responsible business decision, you’ll tie up a huge amount of capital and get stuck with expenses when work slows down. And it’ll slow down. If you’ve been a business owner long enough, you know it always goes up and down, and you never stay on top all the time.
This is why you need to be flexible. If you’re able to access only what you need when you need it, you stop draining cash on assets that sit and collect dust for months.
Why would you sink tens of thousands of dollars into a forklift you’ll only use for part of the year? Does that make sense?
No. It’d be better to keep that money free, so why not look into forklift rentals?
| A new forklift can cost a business $25,000-50,000 (USD); renting costs $150-300/day on avg. /or/ $1,200-2,500 per month. Turning that into a variable expense helps protect your working capital. – CostOwl |
Changing fixed costs into variable ones will make what your business spends match what’s coming in, which means steady cash flow.
Where flexibility really pays off
Here are a few areas where staying flexible pays off big time.
People on demand
Payroll is one of your biggest expenses, and if you have more full-time staff than you need, your cash will dry up. It’s better to use temporary or project-based workers because that’ll help you ramp up during the busy times and scale back when everything slows down.
| Labor costs account for ~70% of total business expenses in the U.S.; payroll alone is averaging 20-30% of gross revenue. – U.S. Small Business Administration |
You end up paying only for the staff you truly need, when you need them, instead of having all that payroll all year-round.
Tech you can scale
It used to be normal to make big software purchases and pay them all up front, but this can cause a lot of problems. It ties up your cash, and you’re left with tools that might be outdated in a few years. There’s really no point in doing something like this anymore because cloud systems and subscriptions allow you to pay as you go.
This means you can add or drop services as your business changes, which keeps your budget on track and you don’t risk paying for something you don’t use or something that won’t adapt.
Space and gear you don’t have to own
Do you own a warehouse or an office space? Maybe even some heavy equipment?
If you do, then you’re locked into huge fixed costs. And that’s a shame, especially with all those flexible alternatives out there, like shared spaces, modular facilities, and the ability to rent equipment. This way, you still get everything you need but without the long-term financial burden.
| The avg. cost to lease a warehouse in the U.S. has gone up by 25% since 2020, equaling $9.50 (USD) per square foot per year. – Coldwell Banker Richard Ellis (CBRE Group) |
This is how you turn a rigid overhead expense into something you can scale up or down, depending on what you need and how much business is coming in.
Smarter supply options
Supply chains can cause tremendous problems because they can break down without warning.
When that happens, cash flow goes right along with them, which is why you should keep agreements with suppliers flexible. It’s also smart to work with more than one source, or you risk delays, and you probably already know how expensive those are.
If you have options, you’re not stuck paying a premium to keep your business running. This is such a simple but incredibly powerful way to protect working capital from the shocks that sooner or later come when you rely too much (or, worse, exclusively) on a single vendor.
Conclusion
Cash flow is your lifeblood, and if you don’t keep your operations flexible, you put it at risk.
Business is unpredictable, and if you’re always keeping things rigid, how can you adapt? You’ll end up cracking under pressure when you should be bending and adjusting.
Cash doesn’t like to sit still, so move it and give it room to breathe.