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The topic of money has been on my mind quite a bit lately. I want more of it. Not because I want tons of lavish things but because I get really stressed out when I don't have enough.
I bought and renovated a house almost three years ago now. I love that I did it, but since then I've been constantly stressed out about making my mortgage payments. Thanks to my amazing younger brother I haven't missed one yet, but it's come pretty close.
As a founder of a small start-up, I also think a lot about money during work. For more than two years, we've been talking about our "runway," or how long our company will survive without more funding. It's always the elephant in the room.
The things that make people happy are most often not directly related to money. Another member of Brazen Careerist mentions in a post that genetics can even play a role. However, one of the biggest reasons people are unhappy is because of stress. And one of the things that an entrepreneur is most stressed out about is money.
For an entrepreneur, nearly everything revolves around money. Product decisions are made based on it. Hiring and marketing plans are dependent on it. The amount of money a company has can even affect it's overall business model. Furthermore, without enough money, significant effort has to be spent to find more. This is a full time job and can severely detract from a company's ability to focus on its products.
I've mentioned before that one of the key characteristics of an entrepeneur is the overwhelming desire to innovate. More than any one thing, this is what motivates us. A lack of adequate funding has a direct impact on our ability to focus on innovation. As a result, every aspect of the business suffers.
Unfortunately, we've heard a lot in the news about what happens when companies run out of money. As funds begin to dwindle, layoffs start and don't end until the company can extend its runway to a comfortable length.
After the layoffs, how does a company continue to operate? Here's a list of some things that startups should think about when they're running out of money. I have a few thoughts and additions as well:
- Set realistic goals. Understand how long it's going to take to execute your strategic plan. Be
pessimistic that you can make it and ensure that you can accomplish what you set out to do. - Constantly re-evaluate your goals. It's incredibly difficult to determine how long it will take to execute your strategic plan. It's a good idea to come back to it every month and make sure you're on track.
- Outsource, if possible. I really do believe that the world is flat, especially coming from an IT background. Outsourcing isn't an option for everything, but it can be very cost effective.
- Give up equity. Without money, it's probably the one thing that your company can give up to achieve its goals. Nobody wants to have to do it, but an exchange for equity may be the only way you can get something done.
There's no way to get around the fact that money will drive many of the decisions an entrepreneur has to make. However, be sure you have a firm grasp of what it is you're trying to achieve and how long it's going to take to get there. You might just be a little less stressed out as you head down the runway, and hopefully a little happier.
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Comments
01.20.09
Very good post Dale. I'm not an entrepreneur but I'll try to add to your list above regarding a startup running out of money.
1) closely watch and track progress of other companies in your niche/industry.
2) closely listen to your audience and customers to get ideas that may work for your business model.
3) be flexible to the extent possible as change is inevitable and your ability to respond and adapt to it is critical and will determine your success.
01.20.09
Thanks for the comments, Mark. You have some great points there as well. The entire list of things that an entrepreneur should focus on is incredibly long. If others have ones to add, I'd love to see what we can compile in the comments here. If I was to add a few more:
1. Use every free resource you can - Small Business Development Centers, Entrepreneur Groups, Chambers of Commerce...
2. Find a good mentor (or several) and be sure to engage them on a regular basis.
3. Network with everyone you can. You never know when someone will be able to help you out.
01.20.09
I read a recent post on CleverDude about differnt ways people spend money to buy peace.
In this case it sounds like you are wishing you had some $ cushin to buy your company and your personal finances some peace of mind!
Good luck to you.
01.21.09
To quote a senior director at McDonnell Douglas, watching a large number of engineers and technicians who left to form their own businesses, come back to compete for their old positions:
"If you're not making money with your business, all you've got is an expensive hobby."
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