Start Ups Potential Downfall - Running out of Cash
Start up companies face many of the same entrepreneurs’ challenges. An article in the July 22nd Boston Globe details one challenge:
Running out of cash at this critical stage is germane to most companies – whether self funded, family and friends' money, or from an initial infusion from outside investors. A common mistake is seeing this funding as endless to be followed by additional investment or from new revenues. Both of these timeframes are major unknowns and face numerous uncertainties. Founders, ever the optimists, will make decisions that are unrealistic and not factually based. They may overspend on ‘cool’ locations to impress investors and customers, select locations that are convenient and favorable to their employees, or on expensive furniture and equipment that they don’t really need at that stage or are geared toward the size that they hope to grow to in the future.
Start up businesses should be selecting locations that are affordable first, match their current size and production needs, and their financial assumptions should assume that their growth and funding will take at least twice as long as their current plan calls for. They should not be selecting cool digs in very expensive locations. It would be prudent to be making conservative and practical decisions over convenience for employees including the founder. While favoring employees interests is a good philosophy for a company, wouldn’t it be a better decision criteria that ensures that the company will continue to exist in 2 years and they would still have their jobs.
Real estate costs is one of the largest expenses of start-ups, particularly with manufacturers. Select very functional locations that offer ready made value to your business in locations that offer reasonable lease rates. Lease what you need now and can expand as revenues and funding grow. And, select locations that are business convenient – for transport – and offer available potential skilled
@CI_Works, we focus on making this tooling available to companies at these critical stages and work with them to grow their businesses affectively.