It has always fascinated me why public and private funding agencies require proposed 3 to 6 months budgets from entrepreneurs, when the truth of the matter is most starts ups have no clue of what their doing, no clue where their next sale is coming from and are working on the belief of “I’m not wrong”. If you’re a start up which is fortunate to have liquid capital, I propose the following that helps you keep cash flow positive and simple tricks for those with no accounting skills.
- Stop making your suppliers rich, consistently buying stock on an ad hoc basis is a very quick way to lose cash, put in steps such as a 7-day waiting period before purchasing stock and if your supplier has a minimum purchase, make sure you buy stock once you have made profit on the previous batch.
- Focus on understanding your cash flow, draw up a simple monthly journal on excel with the month and days as well as a in and out column based on your previous transactions, so you know your daily flow.
- Know your fixed costs, as a start up within the initial 36 months, focus on breaking even.
- If you are looking to purchase equipment, get 3 quotes
All in all, I personally don’t believe in budgeting especially within the initial 24 months, but rather focus on managing your cash flow, remember to be disciplined, move slowly and strike hard. Of course, I write this with the best teacher of all, hindsight.
Founder & CEO
Why 3 Trampolines – In my opinion, most start ups will need 3 good bounces to make 1 great leap.
This blog is the opinion of the writer and does not necessarily share the views of the host provider.