The Entrepreneurial Runway

The term “Entrepreneurial Runway” is commonly used by funders to ensure the entrepreneurs understand that they must have enough money to build a runway, enough money to be able to take off but also to come back and land safely.

What we’ve learned is that many entrepreneurs “shorten” their runway and end up without enough cash to cover their take-off, or their landing from an adventure.

What happens, in our experience, is that many entrepreneurs estimate that they need far less than what they really need to launch or grown their business. This happens because of misinformation - they are counting or assuming that they will have revenue coming in. they think they don’t need more than that because that should be sufficient for the year or for some length of time.

We’ve come to understand is that it takes about twice the amount of money you assume, and sometimes three times as much time to make things happen. Or it could be three times the money and twice the time. That said, you run out of money to start or grow the business before you finish building the runway, so you can never launch the product or service, or derive any benefit from it.

As you start or grow your business, think about how much money you need to build that runway. If, for example, you are starting a retail store, you might start generating revenue from day one. Most likely it will take you up to nine months to reach the break even point.

We’ve seen some cases in which it took three years! We’re not saying you should borrow for three years, but you should be thinking about your plans to make sure you have enough runway without adding stress to your work.

The goal is not to eliminate the risk, but to minimize it.

BEFORE YOU GO

We see our blogs as opportunities for dialogue. Please share your thoughts as comments.

1. How long of a runway do you need, meaning time and money to establish and run your business?
2. How much time and money do you need to grow your business?
3. What other resources or terminology have you used similar to the runway to create a funding sustainability model to launch or grow a business?

_____

Faris Alami is Founder and CEO of International Strategic Management, Inc. (ISM). He works internationally, presenting Exploring Entrepreneurship Workshops and other entrepreneurial ecosystem — related ventures.