Business for Geeks 201: Go with the Flow

It's the bane of every mISV's existance but at the same time, it's what keeps us moving. It's a way of keeping score and to know if we're doing things right, but at the same time, it keeps us up at night and haunts our dreams. It all comes down to one thing: Money.

Most mISV founders won't explicitly tell you that the money is a key. In fact, if you ask them “why did you start your business?”, they'll tell you about having a better life schedule, getting out of a deadend job (my primary motivator), doing something better, working for personal satisfaction, etc. The Money aspect will either not be in the list at all or will be so far down that it doesn't seem to matter. Let me say this once very clearly for all to see: They're lying.

When you start your mISV, the vast majority of people will do it in their “spare time” while holding down a fulltime job. Why don't they just take the jump immediately? Because they're being responsible and waiting for the business to be able to support them financially. No one enjoys living on Ramen and ketchup… but for most people, once you reach their magic number, the rest is just gravy. The key is reaching that number in the first place.

The Good: Cash coming in tells you if you're doing things right and when you change anything (features, marketing, advertising, etc), you have immediate feedback and a way to keep score. Cash on hand gives you a piece of mind and will let you sleep at night. Finally, the ability to spend some of this cash allows you to pursue opportunities that you simply can't otherwise.

The Bad: If you don't have enough money, it will keep you up at night. You won't have the opportunity to take a day off once in a while. You won't have the flexibility to hire someone to handle the [graphics, support calls, accounting, etc]. It will mean that you will always have to watch the calendar and know when your cash runs out.

The Ugly: Chasing dollars can get you into trouble. It can lead you to take the easy money now instead of investing in yourself or your business. More importantly – and probably most disconcerting – the chance for a quick buck can make you bend your morals… maybe just “a bit” the first time, but it turns out to be easier and easier as time goes on.

So Keith, what's your point? You need to keep an eye on your cash flow from day to day and sometimes even hour to hour. When you make decisions that could affect cash flow (in or out), you need to watch your numbers and see which way they move. You need to have and keep reserves. If you reach the point the days you have left are less than your age, it might be time to cut your losses…

Via CaseySoftware I am contacted to build software for porn sites about twice a month. The dollars being thrown around are stunning and the technical issues would be challenging, but it's simply not something I would want to tell my parents or grandparents about, let alone a future employer some day.