Six tips to avoid a cash crisis
Avoiding cash constraints during a volatile market
Interest rates, inflation, tariffs, and geopolitics — 2025 is already filled with uncertainty. During times of increased market volatility, you may encounter a cash crisis. Consider these six strategies to avoid being constrained by a lack of cash.
1. Plan with pessimism
Sketch a few future scenarios to help plan risk management and determine what level of funding needs to be considered. Use a cash flow template to run several examples where sales drop or cease over a period of time. In each scenario, consider any cuts you could make, their impact on gross profit and margin, what revenue you would need to break even, and the length of time it might take to recover.
Each reduction in sales will have a corresponding fall in variable costs, but at some stage you may find it’s not economical to continue with certain products and services if the fixed costs are too high. Knowing your limits in advance will make it easier to respond if a scenario becomes reality.
2. Lean on loyalty
Research indicates that acquiring new clients can be more than five times as expensive as retaining an existing one. Focus on repeat customers or existing clients to make sure their needs are met. Explore ways to not just upsell or cross sell to them but also thank them for their loyalty. Survey existing customers to learn your strengths so that you can lean into those within new customer relationships.
Then contact the rest of your database with special offers to cross sell or upsell to other product lines. Low-cost ideas to grow your customer base during times of tight cash include:
- Selling through online marketplaces.
- Adding social media sales platforms.
- Partnering or collaborating with other businesses.
Additionally, observe any industries or markets that may be doing better than others. What can you emulate?
3. Restructure your business
Act like a start-up — think creatively, reimagine your work, and build a new, stronger business on the foundations of the old one. Think about the parts of your business that work. Reinvent or restructure the areas of your business that are struggling to adjust to the new normal.
You may want to:
- Delete unprofitable product or service lines or close parts of the business that no longer contribute so that you can dedicate those resources to the profitable lines.
- Sell or lease assets not needed.
- Change the expertise mix of your staff, including possibly letting some go.
- Explore closely related products and services for opportunities to diversify with low investment cost.
If you decide to restructure, gain as much business advice you can from your advisors, existing staff, industry experts, and those you trust. Validate your ideas by subscribing to industry news, visiting business association sites, and talking to suppliers.
4. Review the state of your supply chain
It won’t only be your business that’s impacted by a crisis. Keep communication open with the suppliers you rely on to outline what’s happening and identify risks to your business if they suddenly are no longer able to deliver. This is especially critical if you have exclusive or hard to replace materials or products as part of your own delivery to customers.
Think back to your loyal clients and identify which suppliers are most vital to maintaining customer satisfaction. Develop an alternate supplier plan for back-up if your existing supplier can’t deliver, making sure to prioritize solutions for your core products or services.
5. Automate liquidity
The easiest way to have cash available is to have a strong reservoir, but it can be difficult to remember to move surplus funds into savings accounts or investments. Talk to a financial partner about any available resources that might use automation and help you take advantage of moments of surplus cash. Options like sweep accounts can automatically pay down a line of credit, move excess cash into investment accounts to maximize interest, or even concentrate cash from multiple accounts.
6. Raise extra capital
Explore ways to free up cash within your business, such as selling machinery that you no longer need, or vehicles you use on an infrequent basis. These could then be leased back if you need them again. Similarly, consider liquidating excess inventory or raw materials, or even selling a tertiary part of the business. If you’ve explored ways to diversify your business, consider approaching investors who would be interested in the new initiatives.
Look closely at the business assets on your balance sheet to see what you don’t need and convert as much as you can to cash without handicapping your core business.
Next steps
- Identify what stage of cash flow stress your business is experiencing. Decide if emergency action is required and when.
- Plan for a variety of possible outcomes. Discuss goals and priorities with key stakeholders to determine the best path forward in each scenario.
- Talk to a financial partner about lending solutions, lines of credit, or automation accounts that can free up cash and optimize interest.
