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While profit can be a great way to measure the success of your business, 

 is essential to keeping your business running. And if you’re a product-based business, your inventory is one of the biggest factors for managing cash flow. It’s easy to tie up a lot of cash in inventory, and optimizing your inventory management process lets you keep enough free cash available for other operational expenses.

Having the right strategy to manage inventory will push your cash flow in a positive direction. It’ll help you keep the right products in stock, avoid excess inventory, predict cash flow, and understand the best time to order new inventory.

So, how do inventory and cash flow work together? Keep reading to find out.

Why cash flow is so important for businesses

Cash flow is the money that flows in and out of your business, reflected on your cash flow statement. Cash flows in from product sales, investment income, and asset sales—while it flows out through inventory purchases, interest payments, rent, and salaries.

Good cash flow means you can pay your bills and keep investing in growth. When you have money coming in and good cash flow projections, you can invest in product research, test product categories, research new designs, and build marketing campaigns.

Poor cash flow will impact your ability to operate and grow. Even if you have good 

, if you can’t reliably collect money from customers and other sources, you don’t have a predictable source of cash to cover expenses or re-invest. One late invoice payment means you may struggle to pay expenses and be unable to buy the inventory to sell to customers.

Inventory is one of your greatest assets as a product business. You need enough stock to fulfill orders, and if you run out, you run the risk of missing sales and losing customers—or at least losing out on customer satisfaction.

The problem comes when you don’t accurately predict how much inventory you need. Buying too little inventory saves money but increases the risk of out-of-stocks. If you purchase too much inventory, your company may tie up cash in products that sit on the shelf and may even need to be discounted to sell before they expire or go out of style.

Inventory optimization will help you maximize your company’s cash flow. You can use current 

and historical data to determine how much you can expect to sell monthly. This information will give you insight into the optimal inventory to buy to avoid running out or keeping too much in stock, giving you an ideal inventory level.

Inventory management tips for improving cash flow

So, now you know why inventory management matters for cash flow. What are a few ways to optimize inventory for better cash flow? Let’s take a look. 

One of the first steps to smart inventory management is understanding how much product you’re currently selling. Use your inventory management software to create a report covering how much of each product SKU you’ve sold.

You can use different timeframes to gather further insights—daily and monthly reports can help you see how effective your current advertising tactics are. Yearly reports will help you see trends over time and historical order volume during different points in the year.

Your goal is to determine how much inventory you sell each month. This number will help you determine how much inventory you need to order from suppliers and how frequently you need to order.

Track this data regularly and keep an eye on the reports to see trends and make smart decisions based on those changes. This will keep you from overstocking and understocking items that have changed in popularity.

As time passes, you’ll probably see a few of your products do better than the rest. These best sellers will generate the bulk of your company’s revenue. These are the products you’ll need to keep the most of in stock. They’re not only the SKUs you’ll sell most from day to day and the biggest risk for out-of-stocks, they’re also the least likely to cause overstocking problems, as you can sell through any excess quickly. If the 

 holds true (and it usually does), you’ll see 80% of your sales from about 20% of your products.

But that doesn’t stop some companies from stocking many products that underperform. Instead of varying their inventory stock levels for products that don’t sell well, companies still purchase too much, hoping an unpopular product will have future demand and sell more. Companies also consider bulk discounts and believe that saving money on inventory means their business is better off overall. But this isn’t always the case. 

While stocking up in bulk may give you a wider 

, it can cause more problems than it’s worth. More inventory can result in dead stock and excess products, which tie up your cash. You can’t pay the bills with extra widgets, so you often end up discounting them to bring in much-needed cash. Those products that don’t sell well will sit in your warehouse, wasting space, which also costs you money because you’re paying for more warehouse space than your business actually needs. 

Instead, focus on keeping inventory levels up for your best products and reduce the space used for storing inventory items that don’t sell well. Doing this will free up cash flow to experiment with other products or invest in other profitable business activities to fuel growth. (If you sell a ton of shoes but only a few pairs of socks, don’t tie up your cash by buying too many socks. That way, when black socks go out of style and red socks are the new trend (or your supplier gives you a great deal on shoes), you’ll have the cash to order what you need and won’t be stuck with inventory you can’t move.  When Thing 2 becomes the newest trend, you don’t want to be stuck with 1000 units of Thing 1 and no cash to stock up on Thing 2.)

How to calculate inventory turnover ratio 

While there are many granular ways to look at inventory, SKU-by-SKU, one great way to get an overall look at your inventory management is to calculate your inventory turnover ratio. Essentially, this ratio tells you how often you turn over your total inventory, on average, during a certain period. For example, if you measure the inventory turnover ratio for the full year, the ratio will show how many times you’ll sell through the entire stock in a year. A low number may indicate slow sales, but often indicates excessive inventory (i.e., stocking enough to last you months when you can easily restock more often). A high ratio, then, can indicate strong sales or possibly too little inventory on hand, if quick turnover leads to out-of-stocks. 

To calculate the inventory ratio, divide your COGS by your average inventory value.

Inventory Turnover = COGS / Average Inventory Value

This formula makes use of COGS for comparison, because inventory is recorded at cost in your accounting system. These are the costs directly attributed to manufacturing or acquiring the goods. Average inventory is calculated by simply adding your beginning and ending inventory for the period and dividing by two.

When optimizing inventory management, your ultimate goal is to minimize the amount of cash you have tied up in inventory. You want your inventory to sell quickly, giving you the cash required to buy the next batch of inventory for future customers.

This means reducing your order size as much as possible. You only want enough stock to satisfy your current customer demands without running out of stock before your next order.

Remember that this process can take time to get up and running, including dialing in:

Don’t be afraid to liquidate poor-performing products

As a business owner, you won’t always get it right when it comes to ordering or predicting trends. A new product may not sell as well as you expected, but that doesn’t mean the unsold inventory should keep haunting you for months to come. Liquidating old products will help you free up inventory space and generate cash flow for better-performing inventory. 

Your relationship with your supplier may be one of the most essential factors in helping you optimize your inventory management. When you start working with a supplier, there may be little trust. A supplier doesn’t know if you’re a good customer yet, so you may not get the best terms.

But as time passes and trust builds, you can start working to change those terms. One example of this is supplier lead times. Receiving your ordered products quicker will allow you to stock fewer products and have more confidence in maintaining a just-in-time inventory control system.

Net terms are another thing to negotiate with trusted vendors. Again, you’ll get standard terms to begin with, but you can ask to improve them as you build trust with the vendor. For instance, if you’re purchasing inventory on net 30 terms, and your supplier lets you increase to net 45, those additional 15 days can make a huge difference. 

Better terms are a big plus if you have a fast-selling product. You can quickly sell your inventory and pay some or all of your inventory and shipping costs without sacrificing cash flow. As your cash flow improves, you may also be able to get discounted terms by paying 

For instance, 2% 10 net 30 terms would give you 30 days to pay or a 2% discount if paid within 10. This is one way better inventory management and improved cash flow can also grow your profit margins. 

Many of the tips above have focused on avoiding excessive inventory. While tying up your cash in too much inventory is a huge problem, many businesses also struggle to have enough inventory to meet demand. Inventory financing can be the solution to accessing cash flow when you need it so you can order on time.

Improving your inventory turnover by keeping lower stock levels—especially on slow movers—and ordering just in time, you can give your cash flow a huge boost. By partnering with a working capital provider, you can accelerate that cash flow to keep you running smoothly through all the ups and downs of a product-based business. 

Having a financing partner in place, so you can access working capital quickly, on an ongoing basis, makes it simple to tap into cash flow when you need it.

While profit can be a great way to measure the success of your business, cash flow is essential to keeping your business running.

The right inventory management strategies can dramatically improve your cash flow. Find out how just-in-time ordering and inventory turnover impact your cash. 

Improve your cash flow through better inventory management 

How optimizing inventory management can improve your cash flow 

How Optimizing Inventory Management Can Improve Your Cash Flow

As a business owner, tending to your cash flow and profit is one of your highest priorities. You need both to have 

. Knowing these numbers will also help you understand your company’s performance and reach your goals.

Cash flow and profit aren’t the same thing, but it’s not uncommon for business owners to mix up the two. Unfortunately, doing so can lead to costly financial mistakes.

Here, we highlight the differences between profit and cash flow—and how to accurately analyze these metrics to guide your future decisions. The short answer? It’s possible to have cash flow without profit, and vice versa. Profit means your revenue is bigger than your expenses, leaving you with something at the end. Cash flow is all about timing. Even if you earn a profit, you can have negative cash flow if you haven’t collected the cash from those sales yet. Let’s take a closer look.   

Cash flow is money that flows in and out of a business from operating, investing, and financing activities. It’s not the amount of cash you have left in the bank after everything is said and done—it deals with the movement of cash during a specific period. 

So, why is cash flow important? Because you can’t keep your operations running without it. Vendors don’t want to see your P&L statement, they want to be paid, which takes cash.  

Let’s start by looking at the different cash flow types.

Operating cash flow is the money that comes and goes directly from the production and sales of goods from normal operations. It’s also called cash flow from operations and helps determine if your company has enough cash to cover all the bills. If you see a negative cash flow from operations, it’s a sign that you may not be able to sustain your business long-term.

A few examples of operating cash flow include:

, determine how much cash you received from sales and subtract your operating expenses paid in cash during that time. You can calculate your net operating cash flow monthly, quarterly, or annually, and you’ll want to keep an eye on it regularly to anticipate any issues.

Many companies invest in securities and make other investments related to their businesses. These investments allow companies to use surplus cash and create added cash flow to fund other parts of their businesses. 

Investing cash flow also includes investments in your core business, such as research and development. A negative cash flow from investments isn’t necessarily a bad sign—especially if the investments lead to growth.

Some examples of investing cash flow include:

Cash flow from financing is cash in and out from external financing, including borrowing and repaying debt, as well as infusion of cash from equity investors. 

Looking at cash flow from financing gives you a better view of how you manage your 

. You can see which parties (lenders and investors) are drawing cash away—which provides a starting point for reducing financing expenses (such as paying off high-interest debt). 

As you can see, investment and financing activities are an important part of running a business and can be crucial to optimizing your cash position. However, cash from these “irregular” activities can easily cover up the fact that your day-to-day business is actually operating with negative cash flow, which isn’t sustainable for very long. 

Profit is what remains of your revenue after covering certain expenses (which expenses you subtract depends on the type of profit you’re talking about; more on that in a minute). It has nothing to do with your total incoming or outgoing cash—just the difference between income and expenses.

Profits are distributed as payouts to business owners and shareholders or reinvested into the company through research, development, inventory, and marketing.

Several profit calculations can provide insights into your company’s financial health—and how each function of your business contributes to your company’s overall profit. Here are the three main types you should consider.

Gross profit is an essential financial metric that helps businesses understand their profitability. It is the difference between revenue from sales and the costs of goods sold (COGS), excluding other fixed costs like rent and salaries. Essentially, it tells you how much money you're making after accounting for the direct expenses that went into producing or acquiring the goods or services sold.

A positive gross profit gives you something to work with to cover your operating expenses, while a negative gross profit indicates that your business is operating at a loss, even before covering your cost of doing business. It's crucial to track your gross profit over time to ensure your business is making money, and to ensure you have a healthy margin to keep operating.

Calculating gross profit is relatively simple; it involves subtracting the cost of goods sold from total revenue. However, it's essential to ensure that the COGS is calculated accurately to obtain an accurate gross profit figure. COGS should only include those costs that are directly attributable to the production of your goods or services, not indirect overhead costs. 

For example, if you run a bakery, your COGS might include ingredients, cake boxes, direct labor costs for your bakers, and supplies like parchment paper. It wouldn’t include indirect costs like your rent, your marketing expenses, or the wages of employees not directly involved in baking, like your bookkeeper.

Operating profit is another crucial financial metric that tells you how much money your business is making from its core operations. It measures the profit generated by your business's operations after accounting for operating expenses, depreciation, and amortization.

Operating profit is useful because it shows how much money your business is making before considering non-operating expenses such as interest payments, tax payments, and asset sales. This provides a clear view of how much money the business is generating from its core operations and helps determine the effectiveness of your cost management strategies.

To calculate operating profit, you start with your gross profit and subtract those operating expenses you left out of the gross profit calculation—things like rent, utilities, administrative salaries, and marketing costs. 

Net profit, also known as the bottom line, is the profit that remains after accounting for all the expenses associated with running a business. It is the most comprehensive measure of a business's profitability, as it considers all revenue and expense streams, including taxes, interest payments, and asset sales.

Net profit shows how much money a business is making or losing after accounting for all expenses and provides a clear view of the business's financial health and profitability. It's essential to track your net profit over time to ensure that your business is profitable and to make informed decisions about allocating funds.

Calculating net profit involves subtracting all expenses from all revenue, including taxes, interest, and other non-operational expenses. A positive net profit means you have money left at the end of the year to invest in growing the business or reward owners for taking the risk of entrepreneurship, while a negative net profit means the business is losing money.

Cash flow and profit are both key ways of measuring financial health. However, they measure different aspects of a business's financial performance, and their importance depends on the business's current situation.

Cash flow measures the inflow and outflow of cash in a business, while profit measures the business's revenue and expenses. Cash flow is essential because it ensures that a business has enough cash on hand to pay its bills, meet payroll obligations, and invest in growth opportunities.

Profit, on the other hand, is important because it measures a business's overall potential to generate returns for the owner and is necessary to sustain the business in the long run. A business cannot survive on cash flow alone, and a sustained lack of profitability can lead to business failure.

Tapping into working capital to manage cash flow

Cash flow and profit work together to keep your business healthy both now and in the long run. Tapping into an external source of working capital can help you close any cash flow gaps to keep your business running smoothly and also enable you to invest in your company’s future growth and increased profitability.

 can be slow and clumsy when you need fast access to 

, and bringing in cash from investors can compromise your control and ownership. Alternative options like 

 can be the perfect solution, letting you access capital when you need it, based on your revenue and the health of your business.

As a business owner, tending to your cash flow and profit is one of your highest priorities. You need both to have healthy financials.

Understand the difference between cash flow and profit and how to use both metrics to run your business better.

What’s the Difference Between Cash Flow and Profit, and Why Does it Matter to Your Business?

What’s the difference between cash flow and profit, and why does it matter to your business?

What’s the Difference Between Cash Flow and Profit

Say you run a startup that’s found traction and you want to keep growing. As the founder, CEO, or CFO of the company, you’ve probably spent some time thinking about the best way to finance your growth goals:

But things aren’t quite like you thought they’d be when you started your last round of planning. Due to a host of factors, markets all over the world are in a state of flux, leaving business and startup financing in limbo too. So what should you do?

First, take a breath. Then, take a look at the current economic climate for companies looking to secure financing—and consider how you can get strategic about building a resilient capital stack while taking the particulars of your business into account.

The current startup financing environment 

Founders and CFOs of equity-track businesses looking for the next round of venture capital have all heard the rumblings: Access to VC for post-seed-stage companies is tightening  as many investors are limiting their deployment of cash in a wait-and-see manner. Put simply, for many companies, raising a round today is tougher than it was yesterday—and if you can land a deal, it may not be a great one. 

If you didn’t already have contingency plans in place to access cash if venture funding doesn’t come through, then you’re probably among the founders and CFOs trying to think through alternative forms of financing. 

 break-even, and make the current money they have last without knowing when they’ll have access to more. Some are figuring out how to have a successful conversation at the more-challenging negotiating table. And just about everyone is thinking about their options for accessing capital while we see how the markets shake out.

How your capital stack can help you weather the storm

Founders and CFOs can get ahead of the challenges presented by a difficult equity market (and general economic question marks) by being especially strategic about how they finance the company, whether they’re aiming for growth, cementing stability, or balancing both. 

And one way to do that is by taking a fresh look at all your financing options, starting with the company’s current capital stack—and exploring what you need to round it out and optimize for resilience.

The capital stack is the combination of equity, debt, and other funding and capitalization methods used to finance a company’s overall operations and growth. Your capital stack can include traditional financing methods like angel and seed round investments, your Series A and beyond, bank loans, and venture debt. It can also include alternative financing methods, like revenue financing from Pipe.

Why think of your financing as a capital stack? Because businesses in different industries and at different stages of their lifecycle may need various capital strategies to reach their goals.

Learn more about more types of  business financing, including SaaS financing, in our guide to building your startup’s capital stack. 

Cost and risk of different capital options

Each type of capital plays a different role in the capital stack. 

arises from ownership shares in a company and claims to its future cash flows and profits, and is often used for major investments with a longer-term ROI, like 

 comes in the form of bond issues or loans (whether venture debt, startup loans, or beyond), and can help you finance operations and initiatives without 

, as long as you have the predictable cash flow to reliably service the loan payments. Uniquely, revenue financing

through Pipe's platform lets you fund growth and operational needs by treating your recurring revenue as a tradable asset so you can access dilution-free capital. (More on that to come.)

So how does repayment work? Returns on investment are repaid starting at the bottom of the stack. The higher up the in stack the investor or lender, the bigger risk they incur—and typically the more costly their capital.

Equity is always at the top of the stack—the payback is slower, but the cost to your company can ultimately higher if the value of your company grows. While equity investors hope to get a big return from successful investments, they often wait years to see that value materialize—and if the company fails, they won’t be paid back at all. Big risks, but big potential rewards for them—and big capital infusions, but big potential equity loss for you.

Below that layer, debt-holders like banks are more certain of repayment, and often take a slightly smaller reward for their lower risk level, typically in the form of interest and fees.

Traditional financiers—think: lenders and investors—generally want to see where they fit into your capital stack to see where they are in your hierarchy of funding. This helps them calculate their potential return on investment versus level of risk—and may impact your cost of capital. 

What founders should consider when financing a business

A big part of your job as a founder or CFO is to determine the best capital stack for your goals. What that means will vary, but often it translates to figuring out how to minimize the equity you give away—and the restrictions you take on—while still enabling growth and maximizing profits.

For many companies, selling some equity is the usual course of action to take at certain times during the business’s journey. For other companies, equity is off the table, for whatever reason—and for those folks, taking on debt has traditionally been the move. But during an economic downturn, both equity and debt can come with less favorable terms—including things like higher interest rates on business loans, more restrictive covenants, and less cash on the table in a funding round.

In a tricky market, consider what capital decisions will enable your goals today—and set you up for financing success tomorrow, or whenever the markets next shift. Some key things to keep in mind are:

Recurring revenue financing can change the game

If your company generates income from recurring revenue streams, then recurring revenue financing (or RRF) could provide a great opportunity for you to access the capital you need without giving up ownership shares.

Algorithms perform due diligence almost instantly, so companies can stay agile and 

access capital in hours instead of weeks or months

. RRF can also be a strategic way to capitalize your business when other options aren’t as accessible—or as favorable—to your scenario as they might be at other times… perfect for times like these.

With Pipe, you can turn revenue into up-front capital by pulling forward a portion of your booked revenue—cash you can then use to fund your daily operations and growth goals. 

How does it work? Institutional investors bid on your anonymized revenue streams to buy them like an asset. They don’t buy equity, which preserves your control over your company, nor the underlying customer contract, which means there’s no disruption to your customers’ experience. Instead, they give you up-front capital today at a slight discount in exchange for the right to the cash from those revenues as they come in. This gives you flexible access to capital at a low cost and gives investors stable, fixed-income–like returns.  

Once you sign up to trade on the Pipe platform and connect your accounts you can receive a trading limit (how much capital you can access at a given point in time) and bid price (that’s how much capital you can access right away and at what price). Receiving a trading limit and bid price is not an obligation to trade, and these numbers will be automatically updated each month based on your business’s performance, so you can always see what’s available to you.

Your capital stack doesn’t have to be an either/or decision—traditional and alternative financing, equity plus recurring revenue financing plus venture debt… Today there are more options than ever. When the markets and economy are rocky like they are now, optimizing your capital stack for resilience may mean diversifying to ensure you have options even if one type of capital dries up.

Some pre-revenue and very-early-stage companies self-fund or bootstrap, but many are more likely to be heavily reliant on equity, since they don’t yet have predictable cash flow to pay back other financing. Once a company has revenue coming in, business loans and venture debt are often used between equity rounds to extend runway and finance growth without further dilution. 

For companies with recurring revenue, Pipe is an alternative to traditional loans and venture debt, allowing you to grow your business while holding on to as much equity as you’d like. By leveraging the predictable nature of recurring revenue contracts, Pipe gives you access to capital from institutional investors without the warrants and restrictive covenants that can come with traditional debt. (Keep in mind that those warrants and covenants aren’t just fine print—they can have real impacts on your business. It’s especially important during times of economic and industry uncertainty to understand their impact, and when they might kick in.)

And a note: unlike venture debt, which is only available to venture-backed companies, Pipe is available to venture-backed, debt-funded, and bootstrapped companies alike. That means it can work alongside equity or even replace it as your financing source, depending on what you deem best for your business.

With all your options in front of you, you can assess and choose the right source (or sources) of financing at the right time. Whether that means optimizing for something ideal for your stage of business growth, a stack prepared for the current economic environment, or ideally both—having a strategic approach and knowing what you’re working with can help you build a capital stack for the ages.

As venture funding gets tougher to come by and the economy gets rocky, it could be time to revisit your capital stack.

Accessing growth financing is more difficult than ever, but there are still options for startups. Here's what you need to know.

Building a resilient capital stack in a turbulent market | Pipe Blog

Building a resilient capital stack in a turbulent market

How to build a resilient capital stack in a turbulent market | Pipe Blog

, and other companies with recurring revenues offering customer discounts for up-front payment as a cash flow strategy can face steep downsides. Let’s talk about why companies offer annual discounts, the impact those discounts have on businesses, and how you can give customers the payment terms they want—without sacrificing cash flow or your top line.

There are plenty of reasons to offer discounts—maybe you’re clearing out your inventory, running a seasonal sale, encouraging trial signups at a lower rate, or even helping students, healthcare workers, or first responders get easier access to your product or service. Discounts aren’t inherently bad or good—no one knows your business better than you, which means you’re also the one with the most insights into a discount’s rationale.

Sales, clearances, and special offers that help you manage your business or support your community are always going to be around, and can make sense and have positive effects in many instances. 

But there’s another kind of discount to think about too: the annual discounts many companies give customers to get them to pay up front rather than waiting for monthly or quarterly payments to trickle in. These discounts can have outsized impacts on your business. Let's take a closer look.

Annual discounts can diminish revenue and profits

While discounts are a common strategy to improve cash inflow, companies often offer customers as much as 15–30% off to incentivize those up-front yearly payments. It feels good to get the cash boost when the payment comes in—but those percentages are big numbers that can cut deeply into both revenue and profits. 

When you’ve cut the price of your product or service by ~25% to get a lump-sum payment, you’re no longer charging the full monthly rate—which, of course, means you’re also not bringing in what should be the full annual rate. That also means you can’t recognize the full contract value on your financial statements, and your top-line and other numbers could take a hit.

If you don’t offer those annual discounts, you may be able to recognize the full contract value on financial statements. This can help you maintain your 

aka customer LTV, customer lifetime value, or CLV

 . All of this can support the financial health of your business—which can mean better term sheets when raising equity or other capital, and a higher trading limit on Pipe.

Annual discounts can degrade customer value—and the perceived value of your offering

 discounting can also damage the customer’s perception of what your product or service is worth. Think about it like this: The discounted rate becomes a new price anchor—a lower one. If a customer can pay $75 for what you offer, why would they want to pay $100? By defaulting to discounts to encourage sign-ups and annual payments, you effectively devalue your offering and can make the full price seem too high. 

Do annual discounts incentivize recurring payments?

Chances are that if you’ve got customers paying annually, you’re also doing the right thing and sending them a reminder before their yearly payment is due. Sure, there’s something to be said for a “set-it-and-forget-it” strategy. But as everyone knows—since we’re all customers ourselves—this can also backfire. Even with an annual discount, a steep payment once a year can give customers pause when they see that upcoming payment reminder. How many times have you canceled a pricier subscription because you just didn’t want to spend the cash right now?

If your response is to offer them discounts—as we’ve covered, you’re not alone. But instead of those discounts, you can embrace the strategy of allowing customers to pay on the timelines they prefer… at the prices that are truly right for the health and sustainability of your business. How? Keep reading.

So, we know that discounts can get customers to pay up front, which can help your cash flow—but that the downstream effects of regularly undercharging for your product or service can be pretty heavy. How can you solve the cash flow problem and the discount problem?

With Pipe’s revenue trading platform, you can let customers maintain, for example, monthly or quarterly payments while you pull forward the cash flow. This gets you access to funds when you need them—at a far lower cost than steep annual discounts—with no impact to your customers. 

Another plus? You can sidestep the potential negative impact on the perceived value of your offering or a downward push on your future pricing. By charging the 

 amount for your offering, you can see more profit down the road—leading to a bigger cash cushion, more runway, and an overall healthier and more enduring business. 

Ready to stop offering discounts while still getting your cash up front? 

 to get approved and see your trading limit (that’s how much capital you can access) and bid price (that’s how many cents on the dollar or pence on the pound you can pull forward). There’s no obligation to trade, and every opportunity to grow on your terms. 

A look at how discounts can impact your revenue, top line, and profits—and how up-front, non-dilutive capital can help you avoid pitfalls.

Offering annual discounts can be a great way to increase cash flow, but it can also have negative consequences for your business. Here's how to avoid them

Trade steep customer discounts for up-front growth capital

Should you offer customers annual discounts?

Avoiding the downside of discounting | Pipe Blog

When your service business is growing, you want to build on the momentum. But even if you have money coming in, you’ll need enough of it up front to invest in scaling your business. It’s important to know your 

 so you can ramp up your marketing and sales efforts, expand your services, or grow your team at the right time. 

Until recently, service business owners looking to raise capital for growth had two primary options—selling equity or reaching out to a bank for a loan. But if you have predictable revenue, you have another option—trading your revenue streams on Pipe’s platform for non-dilutive capital.

In the past, financing has often either been collateralized by physical assets or has carried higher costs to match the perceived risks. But predictable revenue—whether through retainers, contracts, memberships, rent, or even one-off charges—is emerging as a new asset class in our modern economy. 

Why? Advancements in technology. Secure live data connections allow Pipe’s algorithms to analyze your revenue streams and the health of your business in real time, making financing much more efficient without cutting corners. 

Whether your future revenue is slated to come in next month, next quarter, or next year, it’s a bona fide asset. And you can trade that asset on the Pipe platform for up-front access to capital—your capital—within as little as 24 hours of signing up for Pipe and securely connecting your accounts.

Scaling your service business without giving it away 

Starting and running a business is full of challenges. While you need capital to grow, and raising a funding round can be an effective way to get that capital, it can also be a distraction that lasts months. Sometimes, it might even feel like a full-time job—especially if you consider the time it takes to warm up relationships, build a network, and constantly pitch.

On top of diverting your attention from building your business, selling equity in your company dilutes your ownership. This can absolutely be worth it at certain stages, but it’s a strategic decision to make with thought and care, not just by default. 

If you’re looking to grow or scale up your service business, Pipe offers a fast, flexible alternative so you grow on your terms—without giving up unnecessary equity. 

From property management to recruiting, accounting to consulting, landscaping to IT and fitness centers, we’ve seen all sorts of service businesses tap into non-dilutive financing through Pipe—and they’ve used that capital in all sorts of ways to grow their businesses. 

Fund customer acquisition with non-dilutive growth capital

For many (if not most) businesses, sales and marketing are key components to acquiring new customers. Typically, investments in those categories are also predictable, making it easy to measure and prove ROI. That’s why many service businesses skip traditional financing, reserve their precious equity dollars [for the big stuff], and use Pipe to invest in things like hiring and training salespeople, scaling ad spend, and launching more marketing campaigns. 

Your customers might never even know Pipe exists—but they will notice things like a superior service or upgraded facility.

Many service businesses use the revenue they pull forward on Pipe to level up the experiences the business provides. For example, you can scale faster by hiring employees who can improve or expand your services, such as a customer service rep or an operations consultant. Or you could use Pipe to upgrade your tech stack—for example, paying for a more robust CRM system with AI capabilities. Some companies even Pipe their future revenue to improve the quality of facilities or offices by renovating or adding more equipment and amenities. 

Does Pipe replace banks and equity financing?

While some companies use Pipe as their only financing tool, it doesn’t have to be the be-all and end-all. Every company is different, and Pipe can be layered into your ideal capital stack in whatever way works best for you.

When you’re at a stage in your company’s journey where your annual revenue is under $100K, it might not yet be time to Pipe. (Equity or bank loans can be great tools at that stage!) But once you’ve got service-market fit and a rinse-and-repeatable growth strategy, Pipe could be just what the doctor ordered if you want to 

 without taking on more dilution or getting tied up in an old-school lending process.

In other words? Think of Pipe as part of a toolkit that you can use strategically to grow your company on your terms.

NASDAQ is for equity. And now there’s Pipe for revenue.

So we know Pipe can help service businesses with hiring more employees, expanding market reach, and improving customer experience—but let’s take a step back. How exactly does it all work? As the modern capital platform for all revenue, Pipe allows you to trade your predictable revenue streams for up-front capital to scale your business.

And it’s easy to get started. Just sign up and securely connect your banking and accounting systems so Pipe’s algorithm can analyze the health of your business. Once you’re connected and approved, you’ll unlock a trading limit and bid price (typically .93-.98 on the dollar) so you know exactly how much capital you can access and what your cost of capital will be. When you’re ready, click the “Trade Now” button, and you’ll see money in your account within a day. It’s fast, flexible, and transparent. 

Pipe offers a new option for accessing financing your business as you scale. 

, get connected, and see how much you qualify for today. 

Real estate, accounting, consulting, you name it—learn how professional service companies access non-dilutive capital through Pipe.

Whether your business is seasonal or smooth, Pipe can help you turn future revenue into up-front capital to operate and scale without dilution. 

See how Pipe helps service businesses scale without dilution

How to scale your service business with Pipe

Pipe for service businesses | Pipe Blog

As it turns out, being a founder is hard. You need to do everything—build a product, find product-market fit, get the right people on your team, and convince a few friends to become customers. If you’re lucky, your business will survive the early stages and you’ll even have an opportunity to grow. But for many founders, growth is a major challenge. Folks don’t know where to get started, or how to invest—if they even have the resources to invest.

That’s why we’re excited to share that 

 to help startups grow better, on their terms.

Through this partnership, Pipe will make non-dilutive capital available to eligible companies in the HubSpot for Startups community (whether you’re already part of it or you join now), all fee-free. Additionally, Pipe + HubSpot customers will be eligible for a meaningful discount off HubSpot as part of their 

Introducing a new partnership to help you expand your business—and tap into non-dilutive capital to finance that growth.

Pipe has partnered with HubSpot for Startups to bring fast, flexible financing to growing companies. 

Run your Business

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What’s the difference between cash flow and profit, and why does it matter to your business?

Building a resilient capital stack in a turbulent market

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How to scale your service business with Pipe

Pipe + HubSpot: Tools, education, and capital you need to grow faster, better, and on your terms

Pipe Blog

SubscribeGet the best of Pipe's Blog

Run your Business

How optimizing inventory management can improve your cash flow

What’s the difference between cash flow and profit, and why does it matter to your business?

Building a resilient capital stack in a turbulent market

Should you offer customers annual discounts?

How to scale your service business with Pipe

Pipe + HubSpot: Tools, education, and capital you need to grow faster, better, and on your terms

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Pipe Blog

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