When Needed Cash Isn’t Wrapped Under the Tree

With your 2016 budget complete and officially decked with boughs of holly, you now know exactly where you are headed these next 12 months.  (Haven’t completed your budget yet?  Put down that eggnog and steer clear of Cousin Eddie – we’ve got business to discuss).  For some of you, there remains one tiny thing you need to check off before your name can go from naughty to nice:  Cash – as in, you find yourself in need of more to turn your 2016 budget into a reality.

Fortunately for you, we have you covered.  This January, we are kicking off a three-part series where you’ll learn from some of the leading minds in town who have been there, done that when it comes to securing an exit / investment for themselves or are in the daily habit of providing liquidity to companies in a similar stage as yours. (Consider this a deferred Christmas gift from yours truly, Inflammo).

Why would we do this? Simply put, cash is king – and a lack of capital is the number one reason why startups fail.  To get you thinking in a capital frame of mind, and in advance of our January blog series, here are three questions you can start to ponder today as you work to strategically transition your budget into an investable story:

What are my primary uses of cash?

What are you looking to do with the cash you have?  This most important question is the easiest to determine since you’ve already done the hard work in preparing your budget.

Be thoughtful and strategic in your uses, as you want to ensure a significant portion of each dollar spent is going toward “growth capital,” or those expenses expected to drive revenue going forward. With your expenses fully-laid out, compare that to your projected revenue.  Seeing some red balances accumulate?  Now you have what you need to answer Question #2…

How much cash do I need?

Essentially, the delta between where you are today and where you want to take your business tomorrow will determine the amount of capital you need to make it happen.  It’s not as easy as saying, “We need to go raise $500k,” as there is no need to either over or undercapitalize your business.

Take a look at the aforementioned red balances that are accumulating, establish a cash balance floor, and voilà – you have your answer for how much cash you need and when you need to secure it.

Where does that cash need to come from?

Sources of capital can take many forms.  While the best source of capital is obviously your clients and in the form of revenue, there are many other capital sources out there – ranging from personal savings and friends & family to bank debt or the angel / venture community.  While there is no “one-size-fits-all approach,” I can tell you that not everyone’s dollar is worth the same four quarters.  Knowing your primary uses of cash means you can be much more thoughtful in identifying the ultimate sources.

Hopefully walking through these questions means you now have yet another stress-free Holiday season heading your way.  If the opposite holds true and you feel like you just walked into a tacky sweater party wearing only a turtleneck, reach out and let Inflammo bring a little mistletoe into your life.  We’re here to advise you on all of your strategic finance needs – and we’d love to walk with you throughout 2016 in managing your cash flow. Eggnog on us.

Inflammo provides outsourced accounting and finance solutions to the startup and emerging growth communities. With end-to-end strategic finance offerings, Inflammo is the preferred provider of outsourced CFO and back-office accounting services delivered with integrity and sophistication.