Cash is King
Why Startups Must Stay Laser-Focused on Cash Flow
In business—and in life—cash is king.
For cash to start loving you, you have to start loving it!
For startups, cash flow isn't just an important metric; it's a matter of survival. I've previously written about the life or death KPIs of CEOs, emphasizing how critical runway is to the longevity of a company. Your runway is simply the number of months you have left until you run out of money, and once you hit zero, your company is at its highest risk.
When cash runs dry, several existential threats arise:
Losing key talent: If you can't pay your team, they’ll leave, and replacing them later can be difficult and costly.
Personal financial strain: If you can’t pay yourself, you'll be forced to shift focus away from the company to cover your personal expenses.
Loan defaults: If you have outstanding bank loans and default, you could face dire legal and financial consequences, including potential bankruptcy.
Desperate fundraising: Running out of cash often forces founders to raise money at unfavorable valuations, leading to dilution and, worse, the involvement of investors who may not align with the company's vision. Desperation can attract what’s known as vulture capital, where investors seek high returns at the founder’s expense.
Why Retaining Control Matters
Avoiding investor funding whenever possible is often the best approach. The more equity you give away, the less control you retain over your company’s direction. While many founders think of this in terms of selfish ownership, the reality is that dilution leads to multiple decision-makers, often resulting in conflicting priorities, inefficiencies, and even internal politics. A company with too many "cooks in the kitchen" can lose its focus and direction, forcing founders into decisions they don't agree with—an outcome that rarely ends well.
At the end of the day, founders are meant to be in the pilot seat, steering the business with clarity and conviction.
The Solution: A Simple Cash Flow Tracker
One practical way to avoid financial pitfalls is to maintain a simple cash flow statement tracker. Think of it like running a small neighborhood grocery store—track the cash coming in, the cash going out, and how it impacts your bank account and runway.
Whether you review it monthly, biweekly, or even weekly, the insights gained will completely transform your business perspective. When shared with your management team, it becomes a powerful alignment tool. Priorities will shift, and everyone will start seeing how their work ties directly to the company’s survival.
For example:
Negotiations become more cash-focused: Payment terms suddenly take center stage in customer discussions.
Production aligns with cash flow: Your production team becomes responsible not just for delivering on time but also ensuring invoices are paid on time—since customer satisfaction and alignment with sales promises impact payments directly.
Sales accountability improves: Your sales team will no longer celebrate signed contracts; they’ll focus on paid contracts—a critical distinction.
The Fundamental Truth: Every Business Is in the Business of Finance
A prolific entrepreneur and investor who mentored me in the U.S. once told me:
"Every business is in the business of finance."
Whether you're building a tech startup, a vineyard, or a consulting firm, if you think finance is secondary, it's time to change your mindset.
Cash is the lifeblood of any company. Without it, growth stalls, opportunities fade, and survival becomes uncertain. Just like air is essential to breathing, cash is essential to business. Keep enough of it flowing so you can breathe easy and focus on what truly matters—building and scaling your vision.
Remember: Cash is king. Treat it like your top priority.
