Why Give a Damn:
If there is a single thing, a single activity and a single metric you should care about when building a business (or a sustainable open project – which you should run like a business anyway), it is cash-flow.
The author of this post, Pascal Finette, is Director, Office of the Chair at Mozilla. His focus is on expanding the scope of Mozilla into new constituencies and supporting Mozilla’s Chairperson with the ongoing work of modernizing Mozilla project governance structures, raising Mozilla’s visibility globally, and generally governing the Mozilla project.
Cash-flow is simple: Money in minus money out. If your cash-flow is positive your business lives, if your cash-flow is negative your business dies. Simple as that.
Cash-flow is simple: Money in minus
money out. Tweet This Quote
Yet I am befuddled by the lack of understanding of this essential fact of business. I literally haven’t had a single discussion about the actions which lead a particular business to get to positive cash-flow, or even the notion of cash-flow, with any of the many start-ups I’ve met over the course of the last couple of years. It seems that Silicon Valley’s obsession with growth and the vague notion of “we’ll figure out the business model later” led to a culture of people building companies with the single goal of selling them. And as Silicon Valley culture spreads throughout the world these days, founders all around the globe follow suit.
I cannot stress enough how important it is to get to positive cash-flow as soon as possible. Unless you’re the next Facebook/AirBnB/Name-your-preferred-hot-startup and swim in heaps of venture capital (which to be honest you most likely won’t be – the cards are clearly stacked against you… just look at the stats), having positive cash-flow means you are master of your own destiny. Cash-flow puts you into the driver seat. It allows you to do the things you want to do. And even if you want to raise money to accelerate your growth it puts you into a position of power, not one where you need to beg for money.
I literally haven’t had a single discussion about the actions which lead a business to positive cash-flow. Tweet This Quote
So – unless you want to build your business as an acquisition target (nothing wrong with that – just know that the odds are heavily stacked against you), read up on cash-flow, understand the principles by heart, and make it one of your key objectives!
P.S. Here’s some recommended reading for you – Don’t Build A Company To Sell, Build It To Last by Kanyi Maqubela and anything you can find by Norm Brodsky (a columnist at Inc Magazine), e.g. this piece on cash-flow.
An Unreasonable Challenge:
Go do your homework and figure out what your current cash-flow situation looks like and how you can get to a cash-flow positive state. The life of your company depends on it. So, don’t put it off.
Update: Today I would add a paragraph which explains the situations in which you will forgo a focus on cash-flow for accelerated growth. When you have money in the bank (be it through an investment, loan or simply because you managed your cash-flow in the past) and the time is opportune for you to grow faster you can make a deliberate choice for growth over maintaining positive cash-flow.
This article is being re-featured today as a special “Throwback Thursday” post. We loved it so much, we wanted to make sure all of our new readers had a chance to read this article, (and share in the conversation).