How they do it: McFit customer’s pay their monthly subscription fee upfront which gives the company a fixed income stream. This can be used to finance the fitness center infrastructure.
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How they do it: Lufthansa flights are paid right away when they are booked, although the actual flight is in several days, weeks or months time. This allows the company to utilize the liquidity it gets from the prepayments and also finance their capital expensive operations (e.g. plane maitenance).
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How they do it: Computer manufacturer Dell was one of the pioneers in employing a build-to-order strategy in the 1980s. Computers were first customized and paid for by the customers, with invoices for the computer parts from the suppliers having lenghier payment deadlines. This allowed it to achieve a highly negative cash conversion cycle. In its early years the Cash Machine pattern presented an important means for Dell to finance its growth. At its founding in 1984, Michael Dell’s seed capital consisted of a mere US $1,000.
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How they do it: Blacksock’s subscribers purchase and pay their sock subscription in advance, allowing the company to use the increased liquidity to finance other areas such as growth.
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How they do it: Groupon’s customers typically pay for a voucher or coupon upfront directly to Groupon. This voucher or coupon can then be used to get a product or service with the merchant. Upon delivering the service or product, the business gets paid by Groupon.
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