Tesla Motor's April 1st announcement that it had taken more than 150,000 pre-orders for its Model 3 mass-market electric car was no joke. At $1,000 each, that was $150 million in cash.

It's impressive, given Tesla's track record of delivering late. Elon Musk even joked about the habit during the announcement of the Model 3. All that money may be sitting with Tesla for a few years while customers wait. It's bad operational control, but a great tip for entrepreneurs.

You have new venues for getting cash that don't involve interest on loans or equity for investors. Getting money from customers in advance of delivery isn't a new business model, but it's a strategic move that many entrepreneurs don't think of employing.

Get paid up front

Musk isn't the only business owner who's thought of getting paid up front. During the condo heyday when demand far outstripped supply, people were paying for units in hot markets before buildings were erected. Place a special order with a store and you're likely to pay in advance for goods that will eventually come in, which keeps the store from having unpopular stock on its shelf if you don't come by later to pick it up. Any custom work is, to some extent, a candidate for advance payments, at least enough to cover materials and some of your work.

Subscriptions

This is another old model whose power many fail to realize. Publishers have used it for many decades. You pay for a subscription to a magazine then get the copies over time. But the idea goes further. Amazon's Prime program is basically a subscription, bringing in $99 per customer before shipping or streaming a single thing. It gives the company extra cash, ties in customers who want to get the free and expedited shipping, and gives management more information for planning. Telecommunications of all kinds use subscription models. So do internet-based companies that send "curated" collections of goods every month. Why not try it in other areas? Auto mechanics could take money up front for regular service like oil changes and safety checks spread out over time. Landscapers could do the same, offering a slight discount to customers rather than billing after the fact. Do your customers buy periodically? Set them up for automatic renewals, maybe with delivery to add convenience.

Discounts for upfront payment

Offering small discounts for prompt payment is, again, an old business idea. But if you've found yourself stuck, have you considered offering a more substantial discount for complete payment up front from a customer? That's essentially what Groupon does for its business clients. This might not be something you'd want to do all the time, as it can cut heavily into margins, but if you need the cash flow, getting advanced payments can be a smart move.

Move to more credit card business

If you're in a business-to-business industry, look at getting customers to use corporate credit cards to get paid today rather than waiting however many months for their accounts payment to finally cut a check. This isn't exactly money before orders are made, but if you've become used to corporations taking anywhere from 45 days to 120 days to pay, it's a cash flow present from above and can have nearly the same effect.

All businesses need cash. If you get more inventive about how you structure your business model, you can get much of what you need without the costs you incur by borrowing or selling off parts of your company to finance operations.

Published on: Apr 4, 2016