Managing Cash: Making Every Quarter Spend Like a Buck

1. MANAGING CASH
Tom Walker
Making Every Quarter Spend Like a Buck
Featured in The Metropreneur, March 2014
Capital Access Series #2

2. There are just SPENDING LESS
and
TAKING IN MORE
TWO WAYS
to increase the cash available
to a startup company

3. Spending
LESS
When you don’t have a product to sell
or customers to sell it to yet,
find smart ways to
spend less.

4. Create a mindset, discipline
and culture that conserve cash.
From day one, think before you
spend. Effective cash
management begins with the
founder.
As the company grows and
more employees come on
board, if there isn’t a firm and
well-understood practice of
managing expenditures, things
can quickly unwind.
1.
Spending LESS

5. Set up a capital plan with cash
flow reports and review them
every week.
Every entrepreneur must spend time
with the books. That’s the only way
you will know for sure how your
money is being spent.
At all times, you should be able
to answer this question: How
many weeks of operating
capital does my company have
left?
2.
Spending LESS

6. Use a home office. Co-locate
with another business. Move
into a business incubator like
SpringBox Labs, The DEC or
Inc@8000, where shared
equipment and a spectrum of
services, such as utilities,
internet and reception, are
part of the package.
Turnkey space, created
especially for entrepreneurs
and startups, can save cash
and time.
3.
Spending LESS

7. Talk to universities and research
institutions to investigate access
to laboratories.
Private sector companies will
often lease equipment off hours.
Some accelerators and
incubators have wet lab space.
3.
Spending LESS

8. Negotiate all fees with service
providers.
Sometimes providers have a
special rate for startup
companies. At TechColumbus,
we have a network of attorneys,
CPAs, market development
leaders and human resources
experts, etc., who have
committed more than $2 million
in reduced and pro bono
services to our clients.
3.
Spending LESS

9. Treat variable costs as if you are
spending your own money.
Which you are.
4.
Spending LESS

10. Internships
Speak to local colleges and universities
about internships. We’ve seen college
interns conduct market research, design
web sites and even perform customer
interviews.
Travel
Try not to. Use teleconferencing whenever
possible. If you must travel, do it smartly
and cheaply using internet sites such as
Kayak.com, Yapta.com, Hotels.com or
Priceline.com.
Delay capital purchases
Use the computers and servers you have. If
you must buy office equipment, buy it used.
Barter
Is there a service you can provide that
another company might need? For example,
can you offer IT consulting in return for
business development help?
4.
Spending LESS

11. Taking in
MORE
At the Concept Stage, it
is really difficult, but not
entirely impossible to
increase cash flow.

12. Taking in
MORE
Invest your personal resources.
Don’t expect others to invest in you if
you aren’t willing to invest in
yourself.
Anticipate needing $25,000 to
$100,000 to carry an idea through
proof of concept. We’ve seen
entrepreneurs tap into savings,
home equity, retirement accounts
and credit cards, but before you take
these steps, talk to customers to
validate your idea.
Make some progress toward proof of
concept.

13. Taking in
MORE
Consider investment from friends
and family.
People who know and trust you may
be willing to accept more risk and a
lower return. Just be aware that
accepting funds from people you
know carries some risk and
consideration all its own.

14. Taking in
MORE
Compete for public/private sector
concept investment funds.
These days, recognizing that venture
capital is almost entirely later stage,
most states, many universities and
research institutions, and some
corporations participate in early
stage funds.
For example, in Central Ohio we just
announced $1 million and more than
$7 million in two new Concept and
Catalyst Funds.

15. Taking in
MORE
Establish a line of credit with a local
bank.
You will need collateral, so this isn’t
easy to do at the Concept Stage—
but even if the bank’s answer is “no,”
start to build a relationship that you
can use when you do have collateral
assets such as intellectual property
or customer receivables.

16. Taking in
MORE
Consider micro-lenders or
crowdfunding.
There are micro-lenders who make
loans from about $5,000 to $50,000.
Investigate crowdfunding, but before
jumping in, be sure to seek expert
advice from an attorney or other
source who understands the
implication for future investors.

17. Every Concept and Seed Stage startup needs enough cash to
survive until the business reaches cash flow positive. Cash
pays the bills. Cash meets payroll. Cash funds the critical
milestones that reduce risk and lead to investment capital.
SPENDING LESS
and
TAKING IN MORE
If an entrepreneur doesn’t figure this
out fast, the business doesn’t stand a
chance of getting off the ground.