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If your startup is running out of cash, accept that it’s game over and prepare for the end. Don’t worry, this won’t hurt a bit. Otherwise you risk becoming a z

by xwdv 7y ago

If your startup is running out of cash, accept that it’s game over and prepare for the end. Don’t worry, this won’t hurt a bit. Otherwise you risk becoming a zombie startup, that is dead but doesn’t even know it’s dead, and that’s a waste of time for everyone involved.

ykevinator 7y ago
Zombie is perfect, this is so true
hodgesrm 7y ago
Your advice is way too binary. Cash flow crunches happen all the time in bootstrapped startups. First thing is to cut costs because you can do that quickly. 1.) Cut/defer all discretionary costs. 2.) Founder salaries go to zero. They signed up for it. 3.) Defer sales commissions, e.g., don't pay until the company gets paid. 4.) Defer payments to vendors. If it's 15 days net pay in 60. Our customers do this all the time. 5.) Last of all lay off staff. If you can avoid this step it makes your bounce-back way faster. Do all of this before you need to. At the same time go after your marketing strategy. Downturns like what we are seeing now also represent opportunities for companies that can reposition to save users costs. Payoff for this will be longer term. Finally...It's a bit late to point this out, but it's dumb not to setup a credit line when times are good so you can get through cash flow crunches. I would shoot for something that gives you 6 months runway if you can get it.
- zeckalpha 7y ago
  > 4.) Defer payments to vendors. If it's 15 days net pay in 60. Our customers do this all the time. Not good advice if you think the crunch may last more than 60 days.
  - hodgesrm 7y ago
    It's part of 'flattening the curve'. In 60 days your overall burn can be lower due to other factors, so you can add the payments back in.
    - zeckalpha 7y ago
      Be sure to annualize your effective interest rate.
- xwdv 7y ago
  My man, a lot of these things are symptoms of zombie startups. Maybe once in a while a legit business has to do these things to survive, but most of the time the businesses doing these things are zombies. They’ll never succeed, but they will also never “fail”.
jborden13 7y ago
No. You can always raise more cash or dig your way out. Yes your odds of success lower as your runway dwindles, but it's definitely not game over. I sold my company two years after running out of cash. You can become a zombie startup, but that's usually a function of poor leadership.

by xwdv 7y ago

ykevinator 7y ago

Zombie is perfect, this is so true

hodgesrm 7y ago

Your advice is way too binary. Cash flow crunches happen all the time in bootstrapped startups. First thing is to cut costs because you can do that quickly. 1.) Cut/defer all discretionary costs. 2.) Founder salaries go to zero. They signed up for it. 3.) Defer sales commissions, e.g., don't pay until the company gets paid. 4.) Defer payments to vendors. If it's 15 days net pay in 60. Our customers do this all the time. 5.) Last of all lay off staff. If you can avoid this step it makes your bounce-back way faster. Do all of this before you need to. At the same time go after your marketing strategy. Downturns like what we are seeing now also represent opportunities for companies that can reposition to save users costs. Payoff for this will be longer term. Finally...It's a bit late to point this out, but it's dumb not to setup a credit line when times are good so you can get through cash flow crunches. I would shoot for something that gives you 6 months runway if you can get it.

zeckalpha 7y ago
> 4.) Defer payments to vendors. If it's 15 days net pay in 60. Our customers do this all the time. Not good advice if you think the crunch may last more than 60 days.
- hodgesrm 7y ago
  It's part of 'flattening the curve'. In 60 days your overall burn can be lower due to other factors, so you can add the payments back in.
  - zeckalpha 7y ago
    Be sure to annualize your effective interest rate.
xwdv 7y ago
My man, a lot of these things are symptoms of zombie startups. Maybe once in a while a legit business has to do these things to survive, but most of the time the businesses doing these things are zombies. They’ll never succeed, but they will also never “fail”.

jborden13 7y ago

No. You can always raise more cash or dig your way out. Yes your odds of success lower as your runway dwindles, but it's definitely not game over. I sold my company two years after running out of cash. You can become a zombie startup, but that's usually a function of poor leadership.