Two Lessons from Entrepreneurs
Working with entrepreneurs and startups brings some strong perspectives that big business can leverage:
1. Cash is king. Many businesses have failed because they ran out of cash, not because they were losing money. In big business we look at ratios - % outstanding receivables over 30,60,90 days, SGA as a % of revenue etc etc. All good things. But sometimes, we get placated by ratios.
Startups think in terms of cash "burn" - how much money do i have in the bank and how much am i burning; in other words, how long can i survive? What changes do i need to make, now?
2. No-one is more wedded to their business idea than an entrepreneur. More likely than not, they have placed a big bet on their idea, invested most of their money in it.
And yet, hardly any startup ends up with the business model that they started with. There are many twists and turns on the way; a lot of trial and error. A lot of customer feedback that requires change, quickly. Good entrepreneurs recognize this and adjust, quickly. Recognizing that your idea, that idea in which you invested so much, is not the right answer - that is tough to do. But necessary, and it happens all the time.
1. Cash is king. Many businesses have failed because they ran out of cash, not because they were losing money. In big business we look at ratios - % outstanding receivables over 30,60,90 days, SGA as a % of revenue etc etc. All good things. But sometimes, we get placated by ratios.
Startups think in terms of cash "burn" - how much money do i have in the bank and how much am i burning; in other words, how long can i survive? What changes do i need to make, now?
2. No-one is more wedded to their business idea than an entrepreneur. More likely than not, they have placed a big bet on their idea, invested most of their money in it.
And yet, hardly any startup ends up with the business model that they started with. There are many twists and turns on the way; a lot of trial and error. A lot of customer feedback that requires change, quickly. Good entrepreneurs recognize this and adjust, quickly. Recognizing that your idea, that idea in which you invested so much, is not the right answer - that is tough to do. But necessary, and it happens all the time.
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