Positive cash flow is imperative to the survival of a company. When a company has little money with a promising product in development, there are several options available to keep the company afloat until the product development pays off. Companies have the option to take on debt, seek private investors, or enter strategic partnerships to raise funds (Tan, 2014). As a CFO of such a company, I recommend taking on private investors in order to raise funds.
The decision to seek out investors is an important one that needs careful thought and consideration. Seeking financing for the smallest amount necessary is recommended. Raising more capital than needed can negatively affect the company while raising only the amount needed keeps the company from being diluted (Laniado, 2013). While obtaining funds is necessary, it is equally necessary to keep control of the company. It is also important to be selective when choosing investors (Wagner, 2013). A potential investor should possess interest and knowledge of the company as well as being a secure and dependable investor (Wagner, 2013).
In addition to raising funds, in a time of waiting for product development to pay off, it is important that the struggling company use existing and newly acquired funds wisely. Funds should be allotted to things that are needed for survival or that are necessary for future success, such as distribution channel needs, marketing, intellectual property investments, and technology licenses (Laniado, 2013). Unnecessary expenses should be eliminated completely while other things such as extravagant office space and high salaries should be cut back (Laniado, 2013). Money should be used wisely, and the company’s working-capital reserves should not be depleted until the product development produces positive cash flow (Rao, 2008). It is important to heed Biblical advice regarding money, wisdom, and prudence. Proverbs 8:12 (New International Version), tells us, “I, wisdom,...