Start-ups are like planes - run out of cash and they won't take off
Entrepreneur Phil Morle uses the metaphor of a plane taking off when talking about start-up companies and how much cash they burn.
"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.
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