What do you promise to do better this year to make your business run more smoothly?
Early-stage companies, technology or family-owned or traditional products/services, have different business models, resource requirements and ROI profiles. That said, every one of these businesses shares one thing in common – they need to manage and focus on cash with a laser focus.
Here is an article penned by Fred Wilson (very well-known and successful VC) https://tinyurl.com/qlzm7h7. It emphasizes the importance of managing your most precious resource as well as any, and applies to most early-stage companies, regardless of industry. A few things to bear in mind:
- Forecasting cash on a weekly basis is the right frequency to monitor and plan your cash resource (you can say that employees are the most important, but try and have those is you run out of cash). That said, exercise judgment when determining how far into the future is appropriate for your business. Most early-stage companies reach a point of diminishing returns when going beyond a rolling 60- to 90-day forecasting timeline. Your mileage may vary, but this forecasting timeline is a good starting point
- Don’t fall asleep at the cash-wheel if you obtain a big slug of investment capital or a line of credit from your bank. The roads in Silicon Valley are littered with the bones of companies that raised enormous amounts of early-stage capital and were lulled to sleep – fat, dumb and happy
- Update for your actual results on a weekly basis, and analyze the movements in your cash account. This goes beyond simply ‘keeping score.’ You can derive really helpful data for looking backward from historical data. Stats like monthly cash burn, average weekly expenses, average monthly burn, and DSO can help you forecast with more precision.
As always, apply any recommendation in the manner that best suits the dynamics of your business.
At Black Ice Strategies we work with you to build and market your business, to achieve the goals that your enterprise aspires to accomplish. We’d like to learn more about your business, and how we can help. Drop us a line at email@example.com