In the lesson, we will talk about Cash Flow in the BI Triangle.
What is Cash Flow?
It’s is the virtual cash movement in your company. If the cash flow of your startup is negative, the startup will be bankrupt soon. Because money is the blood of a startup.
In many cases, you have high revenue, high profit on the financial statement and balance sheet, but still don’t have cash. Why? Because the real cash belongs to other parts such as Account Receivables (and it could become Bad Debts). It happens to a lot of startups, especially in the Covid19 situation for the last 2 years.
In my opinion, I believe that the best business model for a startup is the Subscription Model. You can charge the money to clients who using your products for months to years, the money upfront will be used to upgrade the products, the team. On the financial statement, you could be lost a lot (at least in the first 2 years), but in fact, you have the positive cash flow to use in the bank account and your startup keeps growing.
Let’s talk about the Virtual English Testing Platform For Everybody Flyer.us Team as an example:
Our model is the subscription model. The user pays 20USD/account/year to access all our virtual testing on FLYER. We charge 100% upfront cash and give the activated account to the customers. FLYER has the cash during the year to use and plan the financial projection better due to the cash we charge upfront in our bank account.
With the subscription model, FLYER doesn’t use too much cash, so it doesn’t raise too many funds, and doesn’t dilute the shares of the founding team.
Remember, with a startup at an early stage, the positive Cash Flow is much more important than the Revenue/Profit on the financial statement. Keep your cash flow positive, and your startup will win the whole battle.
We finish lesson 4 here. See you in the next lesson.
Flyer.us is hiring a lot of positions in Sales, Marketing, Academic, Artist, Technical (Full-time and Remote). Apply here if you want to be a part of us.
Read more:
Introduction – How to build a positive cash flow startup?
Lesson 1 – What is the mission, vision, philosophy of a startup?
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