Cash Flow

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

  • Instead of relying on venture funds, it is best to get our customers to fund our business. Find those people who care enough about what we are building, so they pay us up front to make sure the project gets built. Once we have a steady stream of customers, we now have the money to build the next project. If we do not run out of cash, no one can tell us what to do.
  • When hiring employees for our business, we want people who align with our goals and vision. We need to think about what we want people to want and how do you tell a story about that. What we know about money is that, past a certain amount, money is no longer a motivator.
  • What is fair to the people in the organization is generally transparent, but not completely. That is because open-book management is fraught with issues in a growing company. We must make sure that people understand what equity means the same way we do.
  • How to finance our business? The rule number one is never signing a personal guarantee, especially for an amount that is more than what we can comfortably afford to pay. Rule number two is to be intentional and establish the discipline. Always have two numbers in place: 1) how much money to spend on the venture and 2) how much time we give ourselves to ship. Once either number is up, we stop and do not continue to feed the black hole.
  • Always maintain a clear picture of how much money we had and how much money we needed. Raising money can be time-consuming, it is better to spend the time on doing the work. Conserve and treat all money raised like it is the last money we are ever going to have. That kind of discipline is much better than always wondering where our next dollar is going to come.
  • Cash flow is so critical to managing It is quite possible for a business to go under from having too many orders. As a bootstrapping entrepreneur, we should keep track of one critical measurement. That is “how many days can we still stay in business?” If the number were getting too low, we would have to take on a project or some freelance work to raise some money fast. And when there was enough of a cushion, we could now go back and invest time on the original work.