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…
The article uses Phil Morle’s plane metaphor: a start-up’s runway is how much cash it has in the bank. The business must start generating revenue before that money runs out—or it risks ‘crashing’. For investors, runway shows how long a company can operate without new funding and how urgent it is to reach profitability.
The first step, as the article advises, is to confront the problem and check where the business is up to. Look at the burn rate (how quickly cash is being spent) and how many months of runway remain. If costs are outpacing revenue and runway is short, the company is at higher risk.
Greg Hayes recommends shifting fixed costs into variable costs where possible so the business only pays for what it uses. Practical moves include cutting unnecessary recurring expenses, renegotiating contracts, and delaying large fixed investments until revenue is more predictable.
Hayes warns that being overly optimistic and buying all the stock and supplier commitments you think you'll need ties up cash unnecessarily. Excess inventory reduces runway and can lead to cash shortages before sales materialise.
Sweat equity means founders and team members doing tasks themselves instead of hiring staff. As Hayes suggests, doing things you can do yourself reduces payroll and other fixed costs, helping the company stretch its cash longer while it builds the business.
Anthony Idle advises outsourcing low-value or menial tasks when they cost you more in time than they would to pay someone else. If a task detracts from running and growing the core business, it’s often more cost‑effective to outsource it.
Idle suggests working out how much you earn from each sale and how many sales you need to be profitable, then focusing on the most cost‑effective ways to win those sales. Targeted marketing helps avoid wasting money on broad campaigns that don’t convert.
Based on the article: (1) confirm current cash and runway, (2) identify and reduce fixed costs, (3) avoid overstocking suppliers, (4) encourage sweat equity where sensible, (5) outsource low‑value work that drains founders’ time, and (6) ensure marketing is targeted to profitable sales. These steps help stretch cash and improve a start‑up’s chance of success.
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