In his book “Heroes are born in crisis”, which was published in October 2022, Holger G. Weiss gives important tips on how to get your startup through such difficult times.
Focus on liquidity control
As Weiss explains in his book, liquidity control and planning are among the most important tasks in a startup and must be clearly assigned. Founders should never lose sight of liquidity, because in the worst case it can happen that the company can no longer meet its payment obligations and has to file for bankruptcy, over which the entrepreneur no longer has any control.
According to Weiss, a particular challenge in the organization and management of the time aspects are the outflows of funds, which are difficult or impossible to control, such as social security contributions, income tax and other payment obligations, which are automatically collected – for young startups, salaries are often the largest individual item.
reduce costs
According to Weiss, one way to prevent his startup from becoming insolvent or over-indebted is to cut costs. Due to lower expenses, the company has “a longer runway” – this means the time that a startup still has liquid funds.
As Weiss explains, companies can save short-term costs and thus bridge a liquidity gap for a few weeks by reducing fixed costs, such as office rent, or by cutting wages. However, it is important to speak openly with the employees and to analyze in advance whether the team can handle such a situation.
As an alternative to forgoing salary, startups could also spend parts of the salary as additional company options. In this way, costs can be reduced and for employees who believe in the company, this variant would probably feel less negative, since the focus is not on doing without, but on the potential for profit through the options.
The German Autolabs founder reveals in his book that startups can also save costs in the short term by negotiating longer payment terms with service providers.
Obtain fresh capital
While young companies can bridge a liquidity bottleneck through cost savings, they should also work to ensure that fresh capital comes quickly.
According to Weiss, simple bridging financing is often sufficient to avert over-indebtedness or insolvency in the short term. A common method for this, which does not involve a great deal of contractual effort, is the convertible loan. This usually does not have to be negotiated with a notary and there is no transfer of shares, which according to the multiple founder saves time and money. However, interim financing or bridging financing must always be clarified with the existing shareholders or other institutions involved.
Another way to get fresh capital at short notice, which has become more popular in recent years, is crowdfunding, in which – unlike in classic financing rounds – smaller amounts are collected from many investors. According to Weiss, a lot of preparation is necessary for crowdfunding, but larger amounts can be raised within a short period of time and liquidity bottlenecks can be bridged.
Editorial office finanzen.net
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