You have a great idea. No revenue, a little cash you borrowed from Mom, and a minimalistic product at best. You’ve decided to “give this a go.” You’re going to bootstrap. Now what?
In the land of the blind, the one-eyed man is king.I advise companies that are bootstrapping to focus on cash flow. If cash is king, in the cash-strapped startup world, cash flow rules.
Positive cash flow allows you to cover your expenses and expand the business. Even negative cash flow is better than no cash flow. It delays the inevitable – and time is the most critical resource for a startup. Generating cash covers a multitude of sins.
Bootstraps that focus on cash flow are more inclined to do what is necessary for success:
- They are forced to get product to market. You cannot generate cash without something to sell.
- They are forced to evolve the product. Paying clients are more demanding. They will give feedback and expect continuous innovation.
- They are forced to figure out who they really are. Selling requires that you paint a vision. If the vision resonates, you’re onto something. If not, you’d better adjust.
- They begin to wrestle with their business model. By paying attention to the ins and outs, you begin to learn about the real costs of doing business. This knowledge will help you figure out how to turn a great idea into a great product.
Cash flow helps the entrepreneur buy time and plot a course. It keeps the entrepreneur’s eyes set on the most important aspects of the business. Focusing on cash flow as your key financial metric won’t guarantee success, but it will set you in the right direction.