Build a Successful Business: The Entrepreneurship Collection (10 Items)

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Cash Is a Reality Check

“Companies hit the skids for all sorts of reasons,” wrote Ram Charan and Jerry Useem in Fortune in May 2002, a time when a lot of companies were hitting the skids, “but it’s one thing that ultimately kills them: they run out of cash.” Entrepreneurs know this all too well. As Chip Conley, CEO of Joie de Vivre Hospitality, told us, probably the two most important measures for the entrepreneur who is just starting out are cash flow and burn rate (the amount of cash you burn through to operate in a given period, usually a month). Even in a more mature company, cash remains a critical variable.

In the big-company world, boards of directors and outside analysts sometimes focus too heavily on the income statement or the balance ...