Cash flow. If there is anything ever more relevant for a startup, please do let me know. Cash is king as the old saying goes, and cash flow is your company’s royal bloodline. I always ask two things first from any company: your cash flow and your balance sheet please. If I get people rolling their eyes on the cash flow part then you know things are in trouble. If company has no clue or projection of it’s cash flow it’s doomed – either to fail or to be so successful they don’t have to care if the money is coming in through doors and windows. Unfortunately the ratio of former to latter is about 10000:1.

Now why is it so difficult for people to do such a simple thing as track and manage their cash flow projections? Any why people do not understand the importance of it? Now in the most basic sense it is the leading indicator for your company’s ability to build your business. If your business plan is calling for investments over 12 months, but your cash flow shows you running out of cash in 9 months then your business plan is simply screwed up. There is no place for wishing for the best that some money would magically appear to get you there. Get real instead and change your business plan AND your cash flow (by trimming the burn) to make the plan work. Startups are no place for dreaming and wishing. They are for keeping your feet and brains firmly linked to the harsh reality called life. If you need to make hard calls its better to do them sooner than later. Later they become inevitable but then you might be already beyond the point of no return on being able to make your business survive.

Don’t get yourself over the cliff. Track your cash flow and months-to-burn – that ensures you will be able to plan for survival and find financing solutions to get you through hiccup-points which will inevitably happen at every company.

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