In Entrepreneurship, Cash Rules
In the entrepreneurial world of startup companies, cash flow is queen, king, and in fact, the whole darn court.
The challenge that every young business shares is to reach breakeven before the money runs out.
Anyone who has ever run a successful business (or had a company fail) has learned the hard lessons of tight cash management—that’s one reason that investors prefer to invest in serial entrepreneurs.
For founding teams who may not have quite developed the cash flow mindset yet, here are some things to think about:
- The only way for a company to improve cash flow is to take in more than you spend. Until your business development efforts begin to pay off and you can push levers that grow revenue, reducing costs is the only choice.
- When you are starting out and don’t have much cash, don’t make any financial commitments that you don’t have to absolutely have to make. Fixed costs are called fixed for a reason. Lease instead of purchase. Barter rather than buy.
- Create a culture that treats variable costs as if you are spending your own money—which you likely are.
- Share office space or locate in a business incubator.
- If you do have to buy office equipment, go with used.
- Make servers, laptops, tablets, and mobile phones last six months longer than you believe is reasonable.
- Build a relationship with nearby business schools and MBA programs to attract student interns for marketing research and other projects.
- Regularly renegotiate fees and terms with Internet, wireless, and cellular carriers.
- Conduct virtual meetings instead of buying plane tickets.
- Seek out service providers that specialize in working with startups. Some attorneys, CPAs, and graphics designers offer discounted rates for new businesses.
- Utilize the services of local and regional economic development organizations. These groups can be excellent sources for no-fee expert advice and best practices. Sometimes they provide stipends for market research and even proof-of-concept funding or grants.
When it comes to managing cash, the culture that you create in the beginning will pay dividends throughout the company’s life.