Before Your Startup Runs Out of Cash, Do This.

Today we’re going to stop you from running out of money, with a single sheet of paper & a pen.

Even if you’re not in dire straits right now, you probably need to cut costs because spoiler alert:

It’s NOT easy to raise cash right now (founders reporting 40% dilution to raise a decent round rn).

And how far are you from profitability?

Most founders have less time than they think, and are closer to the end than they want to acknowledge

…because they’re ignoring this fact:

The #1 reason businesses run out of cash: founder inaction.

Times are tough.

But they get a hell of a lot tougher when you ignore the issues, like:

• Customers taking too long to onboard
• Costs getting out of control
• Product took ages to ship
• Investor checks disappeared

…before you know it, you’re on <4 months’ of runway.

It ain’t gonna get better on its own.

Time to roll up your sleeves:

Step 1: Be honest.

This is no time for glass-half-full.

When time’s running out, fooling yourself into pretending everything’s great is what will lose you the business.

Take an honest look in the mirror, and take stock of your business:

• At current burn, how much time does the business really have left?
• Have the core assumptions changed?
• There’s a reason you’re not seeing the results you want… what have you avoided doing that if you did it, would probably fix things?

You don’t need to spend a week thinking about this stuff.

If it’s important, it’ll be at the top of your mind.

On a blank sheet of paper, write down your 3x biggest problems.

Now it’s time to take the next step...

Step 2: Make an internal plan to get out of trouble.

“Internal” means: within your control.

On your sheet of paper, write 3x of the biggest milestones that are…

• …achievable within 3-5 months
• …going to have a dramatic impact on the state of your business
• …within your control (not dependent on customers / others)
• …ideally, can be accomplished on a shoestring budget

Note: I like to brain-dump 10-15 milestones, then narrow it down based on that criteria

Once you have your milestones, draw a line to what you have to do to accomplish each of those milestones.

My own approach: Expensive Mode, then Cheap Mode. Example:

1. File patent → Hire specialist lawyer & consultant (Expensive Mode. $20K+) → Get template, watch YouTube videos on how to fill in a patent application, get ChatGPT to write draft for me, hire lawyer from Upwork to review+edit+submit (Cheap Mode, $1K)
2. Go live with fintech product MVP → Integrate multiple payment rails systems + Plaid, develop underwriting model, incorporate into app… ($250K+) → Do it manually i.e. Broken Mode for first 100 transactions to prove concept ($10K worth of automations & help from assistants)

Lay out your preliminary plans to hack your way into goals on your piece of paper.

But don’t run off just yet…

Step 3: Circle the wagons with investors.

Founders that surprise their investors don’t remain in their management role for very long.

Time to bring your preliminary plan to the table w/investors.

A few tips:

• Have tough conversations before it’s too late. If you’re worrying what they’re thinking,
• Stay neutral. This is a problem-solving plan, so no matter your relationship, lay out the situation (positives & negatives),
• Be flexible. Seek their advice and stay open to feedback.

Keep them informed, but don’t feel like you’ve gotta get everyone on board.

As one founder put his tough-convo approach:

I’m coming to you with a plan. I’m happy to hear your suggestions, take feedback & consider alternatives. But if you outright tell me I have to do something else and I disagree, well… show me the check you plan to invest in me changing course. It’s my job to save the company.

Speak with them.

Refine the plan.

Then execute.

Step 4: Start taking action.

This is the painful part.

So get it over with quickly & efficiently so you can move on, and the company will live.

Here’s a starter punchlist:

1. Act fast. Stop the bleeding. Put your big-kid pants on. Don’t let it get too late
2. Reduce or pause external contractors. Pause 1099s where possible. Reduce scopes where you can.
3. Downgrade employees to 1099s. Try to keep them if you can. Help them find another home if you can’t. It’s unfortunate, but you’ve just gotta fire people - be sincere, do it on the right terms & leave the door open toward working together later.
4. Cut all non-critical expenses. If it’s not mission-critical to accomplishing your goals, torpedo it (for now). Marketing isn’t going to matter if your company is dead.
5. Reduce critical expenses. Audit every single SaaS, and check your license counts. Contact support@ for any SaaS you absolutely must keep, explain you’re on the verge of cancelling, and ask if there are any retention discounts they could offer. Otherwise, find another way.
6. Err on the side of survival. Better to over-cut, than not to execute to your savings plan.
7. Call in debts. No one gets away with non-payment or late payment anymore. Attempt to renegotiate any long payment terms you have with big accounts.
8. Bring in new business, fast. Focus on quick wins with customers. Home-run deals will have to wait until later.

It’s going to be gut-wrenching.

But you’ll be better for it.

Hit these hard, and your ship will start turning around pretty quickly.

But what’s enough?

Aim for 9 months of runway without new capital.

More is better, especially if you’re raising.

But if you do plan to raise, then don’t believe any investor further than you can throw them (and avoid life-support rounds!).

Stay strong, and do what needs to be done.

Go hit those milestones.

Stick to the plan.

If it wasn’t enough, you’ll know it.