What I know about cashflow

Jules Coleman is the co-founder of Resi, the UK’s leading architectural practice for everyday homeowners. She launched the business with three co-founders in November 2016, and by June 2017, it was cashflow positive. Since then she’s led investment rounds and grown the company at a triple-digit rate. Below she tells us the Resi story and gives advice and insight for those who want to follow suit.

It was a team of four that laid the foundations for Resi in November 2016. Two architects and two entrepreneurs, one of them myself, met to devise how architectural solutions could be delivered faster, cheaper and better.

We put in a modest amount to get the firm off the ground – £15,000 between the four of us. In the initial days we had to be extremely prudent with how we spent, namely on the salaries of new hires, office space, marketing activity and getting our hands on any skills we did not have in the core team.

One guiding thought led all of our cashflow thinking: if we spend money, we want to see it make a meaningful impact on our revenue. By June 2017, we were covering our outgoings, making us cashflow positive. We are now proud to report growth of 800% in 2018 compared to the previous year, and in 2019 we plan on trebling our growth.

Be flexible with plans

We had good financial practice in place from day one. We based cashflow plans on assumptions about what it would cost to serve a customer or onboard a new architect, for example. We could then make 6-, 12- and 24-month plans based around the estimations.

What is crucial, however, is a willingness to tweak these plans. A four-week old company will be radically different to the shape it takes, and what it earns, 12 months later. Many entrepreneurs find that a conservative cashflow plan was not nearly conservative enough when they look back on it a year later.

Companies that struggle with cashflow are often those that don’t respond to the market, instead, sticking doggedly to a course of action that does not reflect external conditions.

Achieving positive cashflow is not the be all, end all. After seven months of trading, we went cashflow negative when we accepted modest investment. We made the decision because we’d found our feet and we wanted to grow faster than our revenue would allow. That said, we tread cautiously, and we set ourselves up to not rely on external investment in the long run.

Right team, right time

A big misconception around cashflow is that a lack of capital is a major restraint on success. For a business that has paying customers from day one, chasing capital should make way for a focus on self-funding. Start small and do what you realistically can.

That realism should apply to growing your team. At Resi, one of our biggest cashflow challenges was hiring people at a pace that kept up with the demand for our product. Frankly speaking, the challenge is waiting on the return from your people because senior hires will typically take a few months to pay back their salary to the business.

We’ve grown the Resi team slowly as a result, turning this challenge into something that has made us incredibly thoughtful and considered about who we’re adding, and why.

Number one piece of advice

My number one piece of advice for improving cashflow is to look at your payment terms. If your terms and timings are out, then your business can seriously suffer. Having your customers pay you 90 days after the work is done is not acceptable if you need to pay suppliers 30 days earlier.

If you have a great business, don’t leave yourself exposed; bad cashflow timing should not be the reason you stumble.

Need support?

Our business managers are here to support you and your cashflow journey, so if you’re looking for further guidance, please get in touch.