I took this quote from Seth Godins latest micro book Tribes:
“Do you beleive in what you do? Every day? It turns out that belief happens to be a brilliant strategy”
This resonates with me because it will motivate us to find solutions that ‘non believers’ will be too inept, apathetic or bored to uncover.
Entrepreneurs ought launch something they beleive in conceptually, not just financially.
Cashflow positive means: More ‘actual’ cash money is coming in than is going out. It does not mean revenue exceeds expenditure. It means physical cash or bank desposts – not promises to pay.
So in order to break it down for the startup crew out there, here it is in simple language we can all understand, whether we are techies, designers, craftspeople or retailers.
Cash vs Profit:
It’s impossible to go broke while your business is cash flow positive.
It’s possible to broke while your business is making a profit.
It’s also possible to be making a legal loss, while we are dripping in cash. So startups out there only need to focus on one thing. Are we collecting more cash than we are spending?. Do this, and it’s impossible to go out of business.
I recently had to conduct some rentoid business interstate. The content of the trip is irrelevant, what’s relevant is the context. rentoid is a small startup with a long road ahead. Cashflow is important vital, so we conserve it where possible. This is what successful startups do. We know where they are on the revenue curve – and so we are frugal.
Flights: Cheapest tickets available with no frills budget airline.
Time: First flight in morning, fly back after business hours – last flight. This ensures a full day conversations and maximum value within the trip.
Hire Car: Smallest cheapest car available (Hyundai Getz 3 door to be precise). Low on cost, low on fuel. Only needs to fit two people and two laptops.
Lunch: A burger and fries at a local pub. (at least it had Sydney Harbour views!)
Internet access: Hunt down free wifi area and buy a $3 espresso.
Dinner: Airport Pizza & a soft drink.
Ok, it wasn’t the most glamorous business trip, but the objectives were achieved with the minimum cost, and we had fun. We’ll fly business class, or in a private jet when our business can afford it, and hence it’s deserved.
Start ups out there: Know where you are at. Never let ambition or ego get in front of the revenue reality.
There’s been a lot of talk lately about an ensuing second internet boom. With the billion dollar sales of many web 2.0 companies it’s easy to see why:
$15.1 billion
$2.6 billion
$100 million
$6 billion
$3.1 billion
$1.7 billion
$60 million
Among others…
To give a little perspective the Nasdaq composite index peaked in the year 2000 at 5132 points. Yesterday it closed at 2320, just under 8 years later.
If you invested $10,000 at the peak, today it would be worth $4521. Still a very bearish 55% capital loss.
Sure we’d have to question some of the valuations, but the market hasn’t started to value ‘ideas’ at over a billion – yet.
Start up lesson – your company is worth what someone is prepared to pay for it.
I recently blogged about the unrealistic valuation of Facebook, seems there’s many who agree with startupblog. Sure web 2.0 is heating up, but as usual they’ll be stayers and those who disappear. The only thing that changes…. This is a really clever and fun parady.
[youtube=http://www.youtube.com/watch?v=KtdV3z9eCm8]
If we want to be here in the long run here’s some simple advice:
Offer a service people need, ensure it has a built in way to make you money, not an exit plan which sells eyeballs – these only work for a few ‘wordbeaters’ (like facebook & youtube).
Here’s a tale of two cafés. Both are within walking distance of the startup blog office. After a while I noticed a few things changing in my favourite of the two. The decore, the Barista and eventually the clientele all changed.
Coffee is personal. The caffeine, hot steamed milk and the chocolate sprinkles are only part of the experience.
So I moved to the café up the road. I’d even walk past the other café to get my ‘new’ caffeine haunt. It was pretty obvious that the first café had lost its cache and customers along the way. I still trades, but not nearly as well.
Then I discovered the owner actually sold about the time everything started to change. The new owners put their spin on things, tried to improve it…. fully leverage the ‘goodwill’ they purchased. Seems the opposite has occurred.
And so it is with restaurants and cafés alike.
The owner is the goodwill.
People buy coffee from her. Her greeting, her skill, the ambiance she created. It can’t be passed on. It can’t be bought from a sole trader.Exceptions such as coca cola, big macs and starbucks grande lattes are already replicated thousands of times…
When buying a business from a sole trader – Goodwill? – No such thing.
You only fail when you give up, or go broke. It’s important not to confuse the two.