Cash Oxygen for Startups

Why Cash Oxygen for Startups?

Take a deep breath. Now exhale. And take another.
Your lungs just infused oxygen into your blood cells for transport throughout your body. And just like oxygen fuels you, cash fuels startups.Oxygen is essential for  life. We keep infusing oxygen in our bodies as long as we live and take away cash and the business disappears.

Lack of cash- Major Reason for failure

90% of small business failures are caused by poor cash flow. Put simply, not enough cash coming in the door and too much going out. Getting paid on time and managing your outgoings is critical to business success. – Dun & Bradstreet (dn smallbusiness.com)

Cash and Startup-Managing Cash

Startup businesses are generally funded by the entrepreneurs themselves.

The three 'F’s –Family, Friends and Fools are the sources of funds in the beginning.

Working capital loans are hard to come by without out establishing steady revenue.

Cash flow forecast by the entrepreneur is therefore important till the business can attract funds from external sources.Failing to plan may lead to business disruption.

Why do many Entrepreneurs say they have financial problems? If you turn to successful entrepreneurs for advice,they will say that the mantra is generating positive cash flow.

Cash Oxygen for Startups-Gary Vaynerchuk                     

"Cash is oxygen. How much money do you have to stay afloat and for how long? Do you have one year’s worth of rent and overhead? First-time entrepreneurs always make this mistake and it’s my biggest concern for them. You have to make sure your actions can respond to the bleeding of cash that occurs before you even turn a profit."

https://www.garyvaynerchuk.com/advice-first-time-entrepreneurs/

Cash Oxygen for Startups

9 Rules to Avoid Cash Flow Problems for Small Businesses-joinharper.com

Keep the cash flow pumping with these tips.

You’ve heard the mantra “Cash is King” when it comes to business. We wholeheartedly agree with this statement. However, when it comes to your growing small business or startup, a more realistic analogy is “Cash is Oxygen”. The faster you move, the more you need. Many business owners fail to understand this until it’s too late. Cash flow issues kill many businesses that might otherwise have survived. According to an oft-cited U.S. Bank study, 82 percent of business failures are due to bad cash management.

Cash Guzzlers

B2B sales sucks up cash. The simple view is that more sales equals more money, but when you’re a business selling to other businesses, it’s not that simple. You deliver the goods or services along with an invoice, and your customers pay the invoice later. The payment may come anywhere between 60-90 days. You’ll often find the larger the customer, the  longer the payment terms. And businesses are great customers that buy with high volume, so you can’t just pass them to collections because they’ll never work with you again. So you’re stuck waiting. 

In India supplying to public sector undertalings may result in cash blockage for  along time.

Chasing the outstanding  payment requires time and this may lead to  loss of focus on other critical aspects of buisness.


Cash Oxygen for Startups- Five Nuggets

  1. Cash flow forecast by startup entrepreneur
  2. Optimizing the operating cycle
  3. Contingency Plans for peaks and valley of cash flows.
  4. Manage Inventory
  5. Focus on cash and not profit

Cash Oxygen for Startups- Conclusion

For startups CASH= Oxygen

Startups correctly focus on keeping burn down because you want your cash to last as long as possible. The more time you have to reach key milestones, the better your chances are of reaching them. This is why VCs usually want their companies to have 18-24 months of runway. We know all too well that most things take longer to prove out than any of us can imagine they will.  This is called  planning fallacy.-Source; Jenny Lefcourt- -forbes.com