The cashflow challenge of balancing social influencers and big brands

Cashflow and social media marketing
CurvaBezier
0

We’re 16 months into our journey and the transition from working with small businesses with short payment terms to brands and agencies like Apple and BBH over the space of a few months has proven a real challenge.

Poorly managed cashflow and the resulting hole in a business’s finances has the potential to be its downfall. Negotiating hard on payment terms and understanding the difference between cash and credit is essential.

VCs are increasingly prioritising profit over growth. The mantra of ‘growth at all costs’ no longer rings true, especially in tech. And entrepreneurs need to have the necessary funds to reinvest back into the business, settle debts, pay expenses or provide a buffer against future challenges.

The challenge of working with influencers

The challenge we’ve faced at Goat is a unique one. We are a social media influencer marketing agency, which means our relationship with ‘suppliers’ is unusual. Our suppliers are individuals who own influential social media accounts. Many are young, many are based in far flung territories, and many don’t know how to put an invoice together.

A brand or agency will pay us a fee and we deliver on average 100-300 posts per campaign across Facebook, Twitter, Instagram, Snapchat or YouTube to hit their KPIs at better value than other channels in the most authentic way possible.

We made a decision early on not to buy or manage accounts ourselves. Many of our competitors do so and their campaigns are limited as a result. We can be more flexible and choose influencers from a far broader network to ensure we’re selecting them based on their audience relevance and ability to deliver on key metrics. As a result, our suppliers require payment for each individual post. Some will be for as little as £10, some £40,000, but on average we’re making over 1,500 payments per month, a challenge in itself.

Maintaining good liquidity is the only option at Goat. ​

The influencer community is becoming increasingly professional. These professionals know their value and often demand payment up-front or within 14 days. The nature of our business means our relationship with influencers is crucial to our success. The balance between negotiating hard on payment terms with influencers at the same time as clients (brands and agencies) without damaging relationships, is tricky, but crucial.

As a rare example of a startup that was profitable from day one without raising funds. Maintaining good liquidity is the only option at Goat. For the first five months it was relatively easy to do so. Our clients were often startups or young companies themselves (eg. Depop, Happn and Lovoo) and understood our request to be paid up-front. At the six month mark we started working with major agencies and brands who, based on their size and entrenched structure, are unable to be so gracious with our demands, which is completely understandable (eg. Apple, Yahoo, Unibet, BBH and Havas). Our campaigns went from £5,000 to £100,000 in a matter of months and we weren’t prepared for it.

The imbalance between paying 300 suppliers within 14 days of a campaign and receiving payment from a client after 60 days was and is a tricky obstacle to overcome. There was a period of two or three months when the transition to major campaigns was taking place, where we felt the impact.

Social media


The key startup cashflow lessons

There are a number of learnings I’ve made over the last 16 months which hold true for any business. The first is to hold firm when negotiating terms, within reason. Most businesses and influencers will amend their terms slightly if you hold your ground. Don’t feel like you’re doing them a favour because they’re a well-known brand. You’re providing a valuable service. The ideal situation is not to pay suppliers until the corresponding payment is made by a client, however, this is not always possible.

The second is to ensure you are constantly aware of exactly how much cash and credit is in the business. Knowing the balance between cash and accounts receivable and reporting on this balance as regularly as possible is essential. Don’t report on it quarterly, do it weekly, but always be aware of where you expect to be at the end of the month through projections. Breaking it down on a project by project, or campaign by campaign basis helps you to understand where you stand too.

It’s essential to use software to generate these reports. You may think your spreadsheets are doing the job, but you’re only making it harder for yourself. You should be able to check your cashflow situation at the click of a button. Thankfully I’m no longer the one making 1,500 influencer payments each month and generating weekly cashflow reports.

As genuine profit over growth becomes the focus in 2017, businesses will succeed and fail based on their ability to balance the books. The bigger a business the greater the cashflow challenge and we’re now fully prepared to deal with whatever the next few years bring.

Nick Cooke
Co-founder
The Goat Agency
Share this content
Tags

Replies

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.