April 12, 2009 Comments (13)
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"You see, there are two types of entrepreneurs in this world: real ones and the folks who play entrepreneurs for some portion of their lives. From a distance, most folks can't tell who's who. In up times, when the market is flush with cheap money and unexplained exits (Bebo, anyone?), everyone looks brilliant.
It's only when the tide goes out that you know who's naked, to paraphrase Warren Buffett.
The differences between the two types of entrepreneurs become clear when the fan and the manure meet. The faux entrepreneurs run for cover rather than dealing with the storm. They go back to their plush, somewhat mindless jobs as vice-presidents at mega-companies, while the real entrepreneurs suit up and clean up the mess."
You need to figure out your runway immediately. This is really easy to calculate: you look at how much cash you burn every month and divide that into how much cash you have in the bank. Your accountant can do this for you or you can simply look at your profit and loss and your bank statement.
Once you know how many months you've got left, you've got to do the hard work of trying to extend it by at least one quarter. This means cutting staff, negotiating with your landlord, and cutting any and all recurring bills. You then need to look at your revenue streams and figure out if you can double them. In most cases, if you do these two simple things, you will have increased your runway by 50% to 100%. If you double your runway, your chances of figuring out what your business actually is will go up exponentially.
You also need to do a monthly P&L review with your management team. Look at every single recurring cost you have and figure out how to cut it. In an up market, this level of obsessiveness is often wasteful, because you're in a race to take market share. In the case of MySpace (NWS) vs. Friendster vs. Facebook all having unlimited funds for a period of time, this makes total sense. Why worry about $100,000 in server costs if you're racing to see who gets bought for a billion dollars first? However, this is not that time. You have to change your style. There are times to hit the gas and there are times to conserve your gas.
Look at it this way: Getting the most market share and running out of cash is the equivalent of getting to the moon first without the ability to get back to Earth. Congratulations, you won the race...and now you're dead!"
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Eric Brown has (30) years in the Multi-Family Apartment Business having built and developed over 17,000 apartment units, both market rate, luxury and tax credit apartments. Having started Urbane Apartments in 2003 after leaving a lengthy stint as a Senior Vice President at Village Green Companies, a national apartment developer, Eric decided he wanted to create wealth, and set out from Corporate America on his own and created Urbane Apartments in Royal Oak, MI.
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