Starting and running a startup is exciting; but only when you have a smooth cash flow! Remember that nothing else kills a startup faster than an insufficient cash flow. Your startup has life in it until the cash flow is proper and it will die right when you run out of money.
How to Avoid Running Out of Money While Working on a Startup
Precaution is always better than cure, so you should know how not to run out of money before you start seeing the signs that your startup may be dying.
So the first thing to do is to prioritize the options:
1- If cash is getting low, meet investors:
Startup funding is generally measured in time and every startup has a certain amount of time left before they run out of money.
You must know the amount you currently have and how much time you have left. This will keep on reminding you that how much effort you need to do to bring in more cash in specific time.
Planning emergency funding for your startup
2- If cash is balance for now, focus on growth:
Growth can mean different to startups based on their situation, i.e. it’s generally advancing to a visibly higher level. So, if you have a working prototype, move towards launching, if you’re launched, work on sales and if you have started selling work on improving sales.
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3- Fundraising should never end:
Explore new investors before you need money. Meet new people, and make most out of these meetings. If you don’t happen to find an investor in a meeting try to get introduced to someone from their contacts.
Once you know your priorities everything goes fine, however, you may need to consider few other careful options to make sure that your startup doesn’t run out of money. Here are some of those points:
- Don’t spend too much if you are raising too little.
- Hire smartly; bring in the people who help you grow the business and can do most of the work or can bring in investors. Read more about developing a super productive startup team.
- Partner up with a person who brings in value to the business or else can bring cash from investors. Know, when to engage a partner in your small business.
- Pay people with equity rather than salary, not just to save money, but because you want the kind of people who are committed enough to prefer that. That’s one of the best ways to motivate employees without a pay raise.
- Don’t panic to see cash flow issues; to solve the problem you need to act wisely!
- Stay focused; don’t waste time when you get a “No” from a potential investor, move on the next one. Also make sure you have a business plan that attracts the investor’s attention.
- If cash doesn’t seem to be coming sooner, think of cutting expenses. Know the startup must haves and can waits.
- Don’t get too excited until the deal is done and money is in the bank.
Technically, fundraising for your startup should never stop, and this article on when is the best time to raise money for startup can better answer all your questions when to pace it up and when to slow it down.
The Bottom Line
Act wisely, know all about your startup cash flow and get it balanced by working the above mentioned areas, and your startup should not run out of money!