Why do companies go bust

In: Companies, Entrepreneurship / No comment yet

3 Dec 2018

Startups die because of a bad product, they say. Because of bad management, they say. Reality is that the ultimate reason, the only reason companies die for is that they don’t have money to pay the bills.

Product – if you have money, you can pivot;
Management – if you have money, you can (arguably) buy;
and so on.

I do understand that lack of money have more, deeper reasons; including bad product or badly managed sales. Or overspend. I do understand that money cannot cure all (even though they literally say “sales cure all” – and I agree).
I do understand that you cannot get financing if the company is not “good”, and therefore it is very important to keep a company in ship shape.

But I guess what I am saying is that one of the most under-thought objectives of a CEO/Founder is to keep the company well financed. The founder needs to make sure that, even for the worst case scenario (and then worse than this), there is enough money in the bank to be able to function.

I have seen so many entrepreneurs who are only focusing on building the product. They raise funds – only as much as needed for the best case scenario (BTW this never happens!). And, surprisingly, money ends before sufficient sales turn into enough revenue.

That is why I respectfully suggest – keep your company well funded. And then be scrappy and use as little money as possible to grow as quickly as possible.

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Radu Georgescu