How to Avoid Cash Flow Problems When Implementing Eco-Upgrades

By Eric Cohen of Padosa.com: Helping Small Companies Get Green

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There is an assumption among sustainability vendors that a project with a short payback – under a year – is sure to get signed off on. I think this is a realistic expectation for a big company who is concerned with sustainability. I don’t think it is realistic for a small company, under $50M in revenue.
I have had a number of vendors propose sustainability projects – lighting, transformers, supply chain, etc. – to small companies that lacked a green strategy. These projects:
1) Had short paybacks of no more than 2 years, and often under a year
2) Were visible projects that would earn the company some green credibility
3) Were relatively easy to implement
Despite these benefits, it is difficult to get small companies to approve these projects unless they have a sustainability strategy in place. What is the hesitation? It is all about cashflow. Regardless of payback, a $40,000 lighting project still requires an investment of $40,000 out of what is likely a difficult cash situation. These companies need to use their cash to fund growth and a lighting upgrade won’t do that.


One option is to work with the company’s leaders to help them adopt a green strategy. However, my experience is that this does not work. The leaders first need to see enough benefit from green initiatives that will help them realize that going green is a tool for improving business performance, and not something that is politically motivated. Start with small wins, and leverage those victories to save more money, and ultimately to affect strategy.
So when it comes to going green, entrepreneurs must leverage their strength – their ability to be nimble and creative – by finding ways to get something done for nothing. There are plenty of no-cost / low-cost ways to save money by going green. Starting with low-cost / no-cost projects is an effective means to build momentum for approval on larger projects. Also, be sure to explore ways to finance projects through power-purchase agreements (PPA).
Look at how the leaders in the field are doing it for inspiration. These companies include Terracycle, Method Home, and Brooklyn Brewery and Interface.
While I’d prefer companies to start with strategy, few do. A reasonable approach is to gain some success saving money through low-cost / no-cost initiatives. This will help you gain some traction. Then begin to look at opportunities to earn more money by moving into green businesses, or by attracting green consumers. Once your company has begun to embrace going green, it will be easy to secure investment commitments.

Eric Cohen is a management consultant who works with small businesses, helping them to reach new levels of profitability. His work with these companies led him into sustainability, and his community site, Padosa.com, is a free site dedicated to helping members go green, profitably. He can be reached at info@padosa.com and welcomes all feedback!

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