When chasing new business in startup land or any business for that matter, the time to revenue is more important than the amount or revenue.
It’s easy to believe that a big $500,000 project is better than a little $5000 project. Maybe the big one takes a year. Maybe the small one takes a week or two.
I say the small projects rule! But before I choose, the questions I usually ask myself include:
How long will it take to get the revenue?
What is the potential for expensive mistakes?
What is the probability that the project will go over the time estimate?
Are we paid in time put in or final completion of said project?
What level of resources need to go into pitching & winning the project?
Will we get more smaller projects after successful completion of the first?
When we answer these we usually find that the $5000 project that takes a week is a far better option than the $500K project that takes a year. And the reason that they are better is that the revenue is compressed.
Spreadsheets cause far more problems in business than they solve. When we sue spreadsheets too much we start to believe our business is the numbers we make up to fill in the columns. Turns out the numbers on the tidy little sheets have very little to do with our business. Our business is about people, emotions and serving needs. It’s about human movement and insight, not predictions and forecasts.
In recent times brand managers and entrepreneurs have become spreadsheet managers. Busy forecasting, doing profit and loss statements for upcoming launches and estimating sales revenue and market share for the upcoming quarter. The problem with most of these activities is simple, they are predictions. They rarely turn out to be correct, and they suck time we should be investing in getting our products to the market, talking with our customers and promoting what we do.
In startup land there are only two colums we need. Expenses and revenue. Once we have these we just need to make sure the revenue side is greater than the expense side. After that we ought leave the spreadsheets to our accountants.
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.
This is why cashflow is King.
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.