5 tips from Oussama Ammar to help start-ups managing their cash and finance

June 03, 2019 by Qonto
Oussama Amar The Family

This article has been published on Medium first on November the 23rd of 2016.

Is it possible to manage your cash and finance without being distracted from the real purpose of your start-up (building THE product and the best customer experience possible)?

We asked Oussama Ammar, co-founder of TheFamily (which needs no introduction: the Y Combinator of Europe), who has advised and invested in hundreds of start-ups, including Menu Next Door, Merci Handy, Trusk and Algolia.

1 - Follow the right indicators

Build your dashboard and follow your “cash position” at least once a week.

Take a look at this:

  • The “cash-burn”: How much money do you lose in your bank account each week? What about each month? Make accurate cash flow forecasts for the coming months, integrate the “cash-in” (how much and when will you be paid (customers, grants, loans, etc.)?) and “cash out” (expenses and investments). Which expenses can you easily stop (marketing, events) versus the fixed ones (rents, servers)?
  • Your "date of death": Depending on your “runway” (i.e., the money you still have) and your “cash-burn” rate (i.e., the money you spend), you can estimate the time you have left before you go out of business (a useful tool to calculate it is:, very important especially before the “product/market fit”)

Before the “product/market fit”

  • A business plan would be useless: cash flows cannot be predicted for very young start-ups. If you need to raise funds, simply make a budget explaining how you will spend the money and your objectives.
  • Your “date of death” must be an obsession

After the “product/market fit”

  • What is your business plan? Congratulations, you have a product and a market. You must now build your projections on the basis of previous data: income, costs, capex, opex... Be optimistic, that's your part to play :)

2 - Be “cash efficient”

Maximize the return on investment of every euro you spent.

Before the “product/market fit”: bootstrap!

  • Earn money! If you find a way to generate income quickly, it will finance the development of your product without having to raise funds too quickly. However, be careful not to become a "consultant", stay focused on your product and your market.
  • Be creative! Without a budget, you will have no better choice than using your imagination to solve problems.

After the “product/market fit”: spend your money reasonably!

  • Don't fall into the trap of startups who start spending their money unreasonably right after their fundraising.
  • Build your war armor: VCs diverge on the proportion of cash that startups must keep as "wad of money", and this depends a lot on the context. But keep in mind that this wad is necessary.

3  -  Manage your WCR (Working Capital Requirement)

Before the “product/market fit”

  • Optimize your bargaining position: pay late, get paid right away, sell at expensive prices, pay at low prices.
  • Pay on future terms: your cash is very valuable at this stage. Feel free to pay under future conditions (after the fundraising, for example), so that you can use your money to develop your product.

After the “product/market fit”

  • Optimize your bargaining position: ideally, your business model allows you to collect payments from your customers before you even pay your suppliers. Renegotiate your contracts as soon as you have reached a sufficient size.

4  - Be a Timing Master

Timing is the most critical indicator for cash and finance. Do not make a mistake, or it can be disastrous.

  • Generate income quickly to be "ramen-profitable"
    To be "ramen-profitable" is to generate enough income to cover the founders' daily living expenses. This allows you to wait before raising funds and to be in a better negotiating position with investors.
  • Know how to arbitrate "time/money"
    Being an entrepreneur, time is your main resource. If spending a little time saves you a lot of time, do it. Outsource repetitive and non-value-added tasks.

I've seen too many startups waste a lot of time managing administrative tasks, with the help of inappropriate tools.

5  - Find the services that will understand you

You can now find many tools made to simplify founders’ life and be more time and cost efficient.

Payfit automates employee payroll (social declarations, paychecks);

Qonto allows you to obtain online a current account and Mastercard cards, in a few minutes, and manage expenses within the team;

Fred de la Compta offers an online on-demand accounting service.

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