Cash is king. The cash dynamics of your startup are often a make-or-break aspect of your feasibility study. There are two sides to cash, what you take in, and what you pay out. The two should be evaluated independently. Since cash coming in is usually a distant dream at a company’s founding, focus on the outflows. To illustrate the point, consider your sales cycle, or how long it takes to sell your product to potential customers. There are some businesses with months-long sales cycles. Imagine the cash implications of this long sales cycle—you have to cover the overhead for months while your team is burning cash, struggling to close sales. There are a bunch of similar cash management activities that are easy to overlook but crucial to feasibility. Bad assumptions here can bury your business. Take each assumption in turn, consider the cash implications, and project out your cash requirements. How much cash do you burn before you get to breakeven? Adding up the monthly losses will tell you how much money you’ll need to build the company.
