Bootstrapper’s cash flow primer
Startup guru Guy Kawasaki says it best:
The theory is that profits are the key to survival. If you could pay the bills with theories, this would be fine. The reality is that you pay bills with cash, so focus on cash flow…Cash is not only king, it's queen and prince too for a bootstrapper.
Cash flow can be a major headache for even small bootstrappers. See the BBC video on Firebox.com, a gadget and toy selling business started by two young UK entrepreneurs with 1000 pounds.
This post at Bootstrapbusiness.org, an on line community for bootstrap entrepreneurs set up earlier this year by Ron E. Porter and Rich Christiansen co-founders of Everest Web SEO, suggests one simple method for keeping track of accounts receivable.
Use the white board:
• Keep all of your invoices and figures posted clearly on the wall where everyone in your team can see them.
• Erase each amount due as payment from a customer comes in and deposit the check
• Mark the invoice as paid and file it
• With each disappearing line of accounts receivable you'll have more money in the bank
Keeping track of what people owe you is key. Break even points and tracking when your company is becoming profitable are secondary, especially if you have no investors.
If you have no money in the bank you can't pay your bills. Charting how close you are to making back the money you've spent or to making a net profit will be little consolation then.
November 13th, 2007 at 10:53 am
When I first starting working at Everest Web, I was really surprised by the whiteboarding, especially for finances! Everyone knew everything that was happening, good OR bad! However, being aware of what was happening made me buy in. I wanted to see those numbers go up and the money come in just as much as the owners did! My desire to see our company succeed reflected in my work. I also felt respected, and “in the know.”
Thanks for the review!
November 14th, 2007 at 4:19 am
Erin,
Thanks for the great comment, and, yes, the white board sounds like a great system. I think it would be particularly important in businesses that aren’t cash up front.
February 7th, 2011 at 12:13 pm
I love firebox!
February 7th, 2011 at 12:14 pm
I love the ray gun from Firebox!