A high level of liquidity is usually preferred as it signifies financial strength and the ability to withstand unforeseen financial difficulties, especially vital during times of economic stress and interest rate uncertainties. Conversely, low liquidity may result in challenges in repaying debts or seizing new opportunities. 

Therefore, it is particularly important for startups to strike a balance between investing in long-term growth and ensuring they have sufficient liquid assets for immediate expenses. Through vigilant monitoring and management of liquidity, companies can strengthen their financial resilience and adaptability in a constantly changing business environment.

Robust cash flow forecasting

Market volatility can be a major challenge for startups, especially those navigating financial services and fintech trends. In 2025, the statistics show that the failure rates for startups are still alarmingly high, with many businesses not making it past their initial years. It’s worth mentioning that around 90% of startups ultimately fail, and a large chunk of them don’t survive their first year. Cash flow mismanagement is a significant factor in business failures, accounting for 82% of premature business closures. 

What is the lifeline then? First of all, it is imperative for startups to develop detailed cashflow projections and strictly adhere to them. It’s important to understand that acute liquidity management strategies serve as a last resort remedy and should only be exercised mindlessly when a company is already facing mounting overdue bills and other non-deferrable payables, while there are no standard means to acquire additional working capital painlessly.

To effectively meet this common need, financial model analysts must be able to create all-inclusive and all-addressing, automated, detailed cash flow forecasts covering at least 12 to 18 months, breaking them down on a monthly basis (or even weekly for the short term – something that sets startups apart from the more established companies). It’s key to include a range of scenarios: best-case, worst-case, and the most likely outcomes.

What’s particularly important is to admit that modern stressful realities demand highly skilled financial model creators with a demonstrated track record of helping resolve crisis management issues. They must assess how different market volatility scenarios could affect a startup’s revenue, expenses, and funding timelines. This proactive approach helps spot potential cash flow issues before they become a problem. It's also important to keep an eye on actual performance compared to forecasts and adjust projections as market conditions and internal milestones evolve.

Key pro-volatility factors that startups must not overlook 

Startups must not blame themselves all the time for failures to meet certain elevated expectations, because in today’s world, unlike it was in the past, not everything is self-manageable and adjustable. Mounting worries about a potential economic slowdown or recession in major markets have already led to a subpar investment activity, cautious consumer spending, and longer startup sales cycles, further complicating things. 

Additionally, ongoing or escalating geopolitical issues – like the Russia-Ukraine conflict or tensions in the Middle East – can disrupt supply chains, drive up energy costs, create uncertainty in specific markets, and generally undermine investor confidence worldwide. Relying on a single supplier or having production concentrated in one area can make the effects of these disruptions even more pronounced.

External factors weigh on outcomes more and more profoundly. We must always be aware of the persistent nature of modern inflation, leading to sticky higher interest rates, reduced consumer spending, and increased operational costs. 

When central banks tackle inflation, usually by raising interest rates, we all know that borrowing becomes pricier, so startups must think twice before enrolling in any kind of loans. This, in turn, limits startups' access to the funds they need and might slow down or even disrupt their market expansion plans. If a larger funding round is anticipated but delayed due to unfavourable market conditions, the market entrants must consider bridge financing options like convertible notes, warrants, or short-term rollable loans if possible.

Strategies startups can implement to enhance their liquidity during periods of market volatility

All in all, startups must explore alternative funding avenues such as debt financing, revenue-based financing, grants, and strategic partnerships that might provide capital without diluting equity.

One of the most efficient yet often overlooked opportunities here is to monetise existing assets – especially, redundant ones. This can include leasing out or selling non-core assets to raise cash without taking on debt. Optimising inventory turnover by adjusting pricing strategies and bundling offerings is also very helpful – as much as introducing subscription models or value-added services for recurring income. 

Cultivating and tirelessly nourishing relationships with VIP clients and multiple investors are also key. This means higher transparency and stronger reciprocality through maintaining active communication with existing and potential investors to keep them informed of the ongoing progress and challenges while building resilience against changing sentiment and spending priorities.

In terms of marketing their products, startups now must be as flexible as they can, considering offering tiered pricing (encouraging the customers’ bulk purchases), subscription models, or usage-based pricing to provide more options for customers during uncertain times. They must prioritise sales and marketing efforts, increasing the likelihood of generating near-term revenue.

Final word: extending cash runway is king!

In 2025, startups are strongly advised to implement aggressive cost management – much more aggressive than well-established firms. The former must scrutinise all expenses and identify areas for potential cuts without compromising core operations or growth drivers, and prioritise essential spending.

Startups must apply every effort to seek longer payment terms with suppliers and shorter payment terms with customers where possible. Unfortunately, in many circumstances, startups are forced to postpone any non-essential hires or capital expenditures until market stability improves.   

Implementing clear invoicing terms and promptly following up on outstanding payments are absolute priorities. Startups must be more proactive now to consider offering early payment discounts, which means a strategic management of payment schedules to maximise their cash on hand without damaging supplier relationships.

It’s of paramount importance for startups to maintain a cash buffer. They must aim to build a healthy cash reserve beyond their immediate operational needs to weather unexpected market downturns or delays in funding. The ideal buffer will depend on your burn rate and risk tolerance. Best of luck!