The spirit animal of the entrepreneur is probably a lion with an element of squirrel in there. On one hand entrepreneurs embody boldness, courage, and fearlessness. On the other hand, they experience fear, anxiety, conservatism, and cautiousness. Can these co-exist? Well, it’s essential and nowhere does this show up better than in how entrepreneurs manage cash.
We know the #1 rule as an entrepreneur is to not run out of money. Cash management is king.
It’s pretty challenging if you have no currency to lubricate your business. Being out of money equates to being out of business. At the same time, companies won’t grow unless they spend money and often times that spending has to happen well in advance of recovering an investment. Many entrepreneurs would love to take their capital raised, go in the backyard, and bury that money for a rainy day. That’s the inner squirrel talking. However, the lion knows they must be bold in order to prevail, taking a leap into the unknown with the confidence that they will “figure it out”. Here are some ways for the inner squirrel and lion to confidently co-exist.
Know the Game You are Playing
Some businesses require significant capital to even be in the game. Examples might include building a national telemedicine network, disrupting a large incumbent with the next generation social network platform, or building a marketplace and needing to seed the supply side in advance of expected demand. These are “go for broke” arrangements that require a lot of capital! You have to get comfortable with it. Burning $300K-$1MM+/month may be exactly what’s necessary to even lay the groundwork. If you define the game up-front you will be much more comfortable playing it.
Understand Cash Cycles and Plan for Them
Healthcare is notorious for this, as is retail. Sales cycles are crazy long in healthcare and cash conversion from buying inventory to selling retail can be nail biting. Don’t be surprised with 100+ day cash cycles! The important thing to manage is having the funds for 3+ months of working capital (operating expenses + payroll) ready. The Stride team can help with this.
Create a Plan and Manage It
It’s easy to come out fearless but at the first sign of a setback, many entrepreneurs get scared. In most cases, these entrepreneurs haven’t thought through their plan in advance. We build all of our plans in Asana which I highly recommend. Having a plan makes it easier to withstand the variability of fearlessness and worry. Your plan should contemplate the required investment and your investment should be well managed (e.g. a budget).
Surround Yourself with Trusted Advisors
The best entrepreneurs I’ve seen know how to stay measured during times of success and times of struggle. Most have advisors, coaches, or service providers they can turn to to help manage their ups and downs. For myself, it took many years to realize most of my anxiety was driven by stories I was telling myself that didn’t necessarily match the facts. Watching money going out of your bank every month can be a goldmine of negative storytelling.
Listen, some entrepreneurs get energy from batting singles and doubles. For others, it’s home run or bust. Both are great, essential, and noble. Knowing where you get energy and what kind of existential pressure you can withstand will help dictate how far you want to swing the pendulum to the lion side. Sure, we celebrate lions in the media but those are few and far between. Great companies are built up and down the spectrum.
Regardless if your inner squirrel or lion shows up today, I’m hopeful you’ll be better equipped to manage the uncertainty of entrepreneurship with confidence.
At Stride, we’ve been founders of lion businesses, squirrel businesses and everything in between. We know what it feels like to be in the game and a little uneasy. Our goal is to reduce that unease by helping you create your financial plan, cash cycle insight, and become your trusted advisor. So much of entrepreneurship is about having confidence and trust in the team around you. We know that and commit our processes to ensuring it. If you want to talk Stride, email us at firstname.lastname@example.org.