What Every Freelancer Must Know – How To Create A Positive Cash Flow Cycle

by on December 4, 2013 · 4 comments

If you are a freelancer, you’ve probably seen this movie before: six weeks after getting the go-ahead on a promising new project, you are still waiting to be paid for your work.

Your customer is happy with what you did, but for some reason they haven’t paid you yet. You’ve sent invoices and follow up emails. You’ve had phone calls and left voice messages.

Awkward, to say the least…

The Negative Cash Flow Cycle

Negative Cash Flow Cycle Diagram

Negative Cash Flow Cycle Diagram

This is what’s called a “Negative Cash Flow Cycle” – during all of this time, you are using your own cash and time to finance the work. You may have even paid sub-contractors to help you with aspects of the project. It is a negative cash situation.

And think about it – the more projects you “win”, the more cash you use up!

Variations of this scenario plague freelancers everywhere. It’s hard for you to grow a business this way, and strains relations with your clients. So how do you break out of it?

The Positive Cash Flow Cycle

Positive Cash Flow Cycle Diagram

Positive Cash Flow Cycle Diagram

You can turn this situation around by thinking in terms of “products” rather than “services”.

People expect to pay for products in advance. Products are easier for you to describe, and easier for your customers to understand and buy. Everybody wins.

“But I sell services!” you say. As it turns out, you can standardize your services into a product-like offering. They key is identifying the services that you like to deliver and are good at, and then standardizing your services offerings.

Turning Your Services Into a Product – Example

For example, let’s say you are a copywriter. How could you standardize the service of writing for various clients?

Here’s an example where I helped a friend “standardize” their offering so they could charge in advance for their services, and deliver a better customer experience.

The Big Idea

This whole Positive Cash Flow Cycle idea comes from an excellent book by John Warrillow, called Built to Sell: Creating a Business That Can Thrive Without You.

In the book, the author talks about the negative cash flow cycle, and how to standardize your offerings to create a positive cash flow. It covers many other areas of strategically planning your business, all told in a story format which is very effective and easy to follow.

This is one of the best business books I’ve read – it really got me thinking about a lot of things and improving the way I do business as well.

Step by step guide:

Here’s a quick step-by-step guide for moving your business to a cash flow positive business:

  • What do you LOVE to do?
  • What can you productize?
  • Create a Standardized Process for delivering it
  • Create a page on your website describing the package (with a buy button!)

Let me know if you are trying to do this. It can make a huge difference for your business!

Our Expand2Web Members Area has more in-depth videos and learning tools about this specific subject. Learn more about this specialized online coaching program here.

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Don is an entrepreneur based in Silicon Valley. He founded Expand2Web and is the publisher of the Expand2Web Blog, and the GetFiveStars Customer Feedback and Reviews service.

Don has written 313 articles on Expand2Web

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{ 4 comments… read them below or add one }

Tim Tewalt December 5, 2013 at 10:52 pm

Thanks for the article, it really hits home. Turning things into products makes sense and the article / example was very helpful. I’m adding the book to my Christmas list and look forward to reading it.


Don Campbell December 7, 2013 at 3:17 pm

Thanks Tim!
It’s a great book – you won’t be disappointed. Let me know if you make any changes to your business along these lines…


Jesus December 11, 2013 at 6:16 pm

So from today I will no longer offer “web design services”. Never again!!!
What I will sell now are web design products 🙂
Do I got it right??
THANKS Don for such good article.


Don Campbell December 11, 2013 at 6:48 pm

That’s right Jesus! Good luck to you and let me know how it goes! I’d love to see your product page once you have it up on your website.


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