Most startups are burning cash, meaning they are spending more money than they take in. Ideally, the startup will hit meaningful milestones around revenue, customer momentum, and more well in advance of running out of money. By hitting milestones, they can then raise more money from investors or achieve break-even to continue on indefinitely. One debated recommendation I’ve heard numerous times is that a startup should internally socialize the number of days of cash on hand until running out (and thus being out of business).
Here are a few thoughts on internally sharing the number of days of cash on hand:
- Share the number of days of cash on hand in the context of the greater mission (e.g. as part of a simplified one page strategic plan)
- Educate the team members on how the ideal startup process works with milestones, multiple rounds of financing, value in growing faster than revenues allow, etc
- Develop a rhythm to share the data (e.g. a real-time LED Scoreboard, weekly all-hands meeting, monthly update, etc)
For many people, the idea of running out of cash in a certain number of days is a scary proposition. Entrepreneurs would do well to socialize it with their key team members and make it something to rally around.
What else? What are some other thoughts on internally sharing the number of days of cash on hand?