Start-ups are like planes - run out of cash and they won't take off
"There's a runway which is as long as the money you've got in the bank and the plane must take off by the end of the runway, otherwise it crashes," says Morle, who heads online venture builder Pollenizer.
Most businesses start with some money to pay rent and wages, to buy equipment and supplies, and for marketing. The trick is to start earning revenue to meet those expenses before the money runs out, and the longer that money lasts, the more chance a company has.
Here are some tips to stop your start-up burning cash so quickly.
Confront the problem: The first thing to do is to check where you're up to.
Reduce fixed costs: "The more you can have your cost structure as a viable cost rather than as a fixed cost the better," says Greg Hayes, director of professional services firm Hayes Knight.
Don't be too optimistic: Hayes says he often sees businesses rushing out and buying all the stock and suppliers they think they'll need to meet the forecast demand.
Use sweat equity: "Do things that you can do yourself rather than going out and employing someone for it," says Hayes.
Outsource low-value work: Business coach and online video marketer Anthony Idle, however, says that it's not worth doing menial tasks that you could pay someone to do more cheaply if they're detracting from the amount of time you spend running and growing the core business.
Target your marketing better: Work out how much you earn from each sale and how many sales you need to start generating a profit, and then look at the most cost-effective way of winning those sales, says Idle.
Frequently Asked Questions about this Article…
Phil Morle uses the plane-and-runway metaphor: runway is the money a startup has in the bank and the business must "take off" (start earning enough revenue) before that cash runs out. For investors, runway shows how long a company can operate without new income or funding.
The article advises founders to "confront the problem" by checking where they stand financially — compare cash in the bank to ongoing expenses. If expenses are outpacing revenue and the runway is short, the startup is burning cash too fast.
Greg Hayes suggests shifting cost structure from fixed to variable where possible — for example, avoiding long-term overheads and keeping spending flexible so the business can survive if revenue stalls.
Hayes warns that businesses often rush to buy all the stock and supplier commitments they think they'll need for forecast demand. Over-ordering ties up cash and shortens the runway if sales don't materialise.
Using sweat equity means founders do tasks themselves instead of hiring immediately. Hayes says doing what you can in-house delays payroll and helps the cash last longer while the business grows.
Anthony Idle recommends outsourcing low-value or menial tasks when paying someone is cheaper and frees up the founder’s time to focus on running and growing the core business — don’t waste your time on work that drags you away from revenue-generating activities.
Idle advises calculating how much you earn from each sale and how many sales you need to be profitable, then using the most cost-effective channels to win those sales. Targeted marketing helps lower customer acquisition costs and improve return on marketing spend.
Look for founders who monitor runway, actively reduce fixed costs, avoid over-ordering inventory, use sweat equity wisely, outsource low-value work when it makes sense, and run targeted, metrics-driven marketing — these practices suggest better control of cash burn.
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