The Magic Cookie Jar
One of the major reasons start-ups fail is they spend in the wrong place or all up front. When people have stars in their eyes and world-changing ideas, it’s difficult to think about mundane money grubbing things like cash flow management. I’ve seen potential billion-dollar companies run out of runway because they put virtually all their initial millions in funding into things like offices with designer decor and information technology - way before they had a single customer , or had even gotten the patents or done a marketing plan.
Of course, financial risk is inherent to any entrepreneurial venture - whether for a start-up or a new product within an existing company. However, everybody (no matter what type or size of company) should have a “Magic Cookie Jar” (or two). My colleague, Jean Gibson, the “CFO to Go” has worked miracles with some of our mutual clients - but eventually even the best financial wizard will run out of cookie dough. So, if you’re starting a new venture, keep a cookie jar (or two) around.
Three things to keep in mind:
1. Sales cycles. How long will it be before you make the first sale? The bigger the whiz-bang - the longer the sales cycle, as you have to do missionary work on what, why, and how. If you estimate it’ll take six months, better put a year’s operating expenses in the cookie jar. Remember Murphy’s Law - if it can go wrong, it will.
2. Channel and Supplier cycles. If you’re selling through or with big companies, can you survive while they “age” your invoices? And, in turn, can your suppliers wait for payment? Again, put something in the cookie jar.
3. Spend where it matters. Set your goals, know your targets and plan your tactics and spending accordingly. For example - if you’re selling a b2b high-tech product, don’t do advertising in airline flight catalogues. For that matter, you may not need to do any advertising. What are the critical success elements? Spend on those first - and office space may not be a first, or even second, priority (and, don’t buy high-dollar designer cookie jars.)
View the Blog Roll
September 16th, 2005 at 11:22 am
Cash is King! Everything takes longer and costs more than you planned. I worked at company where the marketing guy came from a large corporation. He asked for a budget and got it. Spent $75K on a web site, $50K on a booth, bought 20 cases of brochures and cases of beer mugs for a beer party at a regional show. And this was a B2B business. Development was late with the product, and we ran out of money in less than a year. Go figure.
September 16th, 2005 at 7:05 pm
Bruce, are you sure we’ve not worked together somewhere? Sad and sorta spooky that we can tell so many similiar stories of marketer myopia.
In one of my past “real jobs” I once met with a company that was feverishly pitching a strategic alliance - and key to the pitch was their high-profile marketing plan, which consisted almost entirely of a couple of Super Bowl commercials. (This, also for a B2B company). Needless to say I didn’t sign, and the company flamed out, because - ahem - they couldn’t deliver what they were promoting in their marketing. Too bad they didn’t use that commercial money on boring things like service delivery systems.
October 11th, 2007 at 5:56 pm
[…] Innovation Behind The Curtain The Magic Cookie Jar (Start-ups - have some money stashed no matter what.) Everything You Do Is Marketing. (Yes, […]