Professor Raiton’s Inside Perspectives: Entrepreneurship, Creativity, Innovation

By Tim Keane, Angel Investor, Golden Angels Network 

Here are nine simple thoughts about entrepreneurial ventures that apply to most startups.  (Things like cash flow strategy, of course, apply more or less depending on the nature and type of company.)

1.    Use your business model to build an early warning system

A business model reveals how the business plans to make money.  It incorporates all of the assumptions you are making about your business.  You can easily check frequently to make sure the timing and amount of your assumptions are accurate.  Those assumptions include:
a.    How much you will spend to make your product and whether this is a big investment or a vended activity;
b.    How much margin you will make on each sale;
c.    What price you will charge relative to others in the market;
d.    What your operating expenses are;
e.    Your operating income.
f.    The timing of all of these activities – how long to make; how fast to get orders; the customer repeat rate, and so forth.
g.    A break-even calculation that tells you how many units you must sell to have neutral (or break-even) cash flow.

From this data you can chart the amount and timing of cash requirements. This is the central financial management skill in both startups and growing ventures.

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