Why Founders Should Plan Their Cash Flow Early: Don’t Wait Until It’s Too Late

Cash flow is essential for any business, yet many founders only think about fundraising or securing debt when they have 12 months or less of runway left. By then, options are limited, and negotiating power is weakened. The best time to plan for funding is when your company performs well. Here’s why early cash flow planning is crucial:

1. Leverage When Strong When your company is growing and profitable, investors and lenders see you as an attractive opportunity. This allows you to: - Negotiate better terms. - Choose investors who align with your vision. - Structure deals favourably rather than out of desperation. Waiting until you’re struggling can force you into unfavourable agreements.

2. Fundraising Takes Time Raising capital can take 6 to 18 months, depending on various factors. Starting early ensures you aren’t rushed into poor decisions due to a cash shortage. ###

3. Strategic Investors Offer More Good strategic investors bring industry expertise, market access, and growth opportunities. By planning ahead, you can select partners who align with your long-term goals rather than settling for what's available during financial distress.

4. Cheaper Debt When Strong Financially healthy companies secure better interest rates and terms. When your finances are weak, applying for loans often results in higher costs or rejections.

5. Avoid Fire Sales or Down Rounds Raising funds out of desperation can lead to down rounds, unfavourable ownership dilution, or the need to sell at a loss. Early planning helps you avoid these scenarios.

Getting Started with Cash Flow Planning

1.    Regularly Monitor Financial Health

 – Track your burn rate and aim for at least 18–24 months of runway before fundraising.

2.    Build Investor Relationships Early

– Engage with potential investors before you need funding.

3.    Diversify Funding Options

– Consider a balanced approach for equity financing, venture debt, and grants.

4.    Consider Exit Strategies

 – Understand your exit options to make better financial decisions.

Final Thoughts

Successful founders plan early for funding. By managing your cash flow proactively, you ensure your company is in a strong position to negotiate favourable deals, sustain growth, and maximise long-term value. Don’t wait until you’re in a bind—plan ahead to take control of your company’s future.