1. Prioritize What Customers Need, Not What They Might Want

Many startups fall into the trap of overloading their product with unnecessary features that only a small portion of customers use. This not only increases development costs but also delays your opportunity to reach your target customer at the right time. Similarly, offering services that do not scale or hiring talent too early can burn cash without delivering immediate value. Keep your spending aligned with the needs of the majority of your initial target customers and prioritize features that drive adoption and revenue early.

You might need to demonstrate multiple features early to entice early adopters, hence customize in a way where you can show a working product/service with the additional featured labeled as to be developed while selecting the best value proposition that can bring your customers closer to signing a Letter of Intent (LOI) or better yet a Contract agreement. This will allow you to easily scale to entice other customers as you find the right balance between a needed feature versus a nice to have feature. You can always show that additional features can be added, increasing your price point offering yet bringing the value and avoiding customization.

2. Optimize Cash Flow with Milestones

A strong cash flow strategy starts with setting clear milestones that drive returns. Every investment—whether in product development, marketing, or hiring—should have a measurable impact on business growth. Ask yourself: Will this investment help us reach the next stage of traction or revenue generation? If not, reconsider its timing or necessity.

Generating revenue is the ultimate goal for every startup to meet its milestones. However, developing the right business model isn’t always straightforward—it requires a deep understanding of the market, customer needs, a strong value proposition, and a scalable monetization strategy.

When evaluating revenue models, assess how each aligns with your business verticals. Options can include direct sales, subscriptions, licensing, data monetization or other models. Startups can combine models to maximize customer conversion rates and scale customer acquisition effectively.

3. Structure an equity package for your team

As discussed in Part 5, Focus on Generating Revenue, it is appropriate for a startup to evaluate structuring an equity package by paying employees in cash or equity depending on your company’s financial health, growth stage, and hiring strategy. Cash salaries provide stability, making it easier to attract top talent, but they require strong cash flow and can shorten a startup’s runway. Equity compensation, on the other hand, helps conserve cash and aligns employees with the company’s long-term success, though it comes with financial uncertainty and potential dilution. Many startups adopt a hybrid approach, offering a mix of cash and equity to remain competitive while managing costs effectively. The right balance ensures that employees feel valued while the company maintains financial flexibility.

4. Raise Capital Before You Need It

Waiting until your startup is running low on cash to seek investment can put you in a vulnerable position. Many entrepreneurs must accept the reality that fundraising takes time, and investors do look for traction, not a company that is running in desperation mode. It is best to start the fundraising process early—while always focusing on growing your business in a way that you can generate revenue and keep the business afloat. This will also provide you leverage in securing funding on favorable terms. Ideally, create a financial buffer to withstand market uncertainties.

Financial planning is always a delicate balance between moving quickly to grow a company and managing the cost of resources that, while expensive, can be beneficial in the long run. Debt financing can serve as a strategic tool to accelerate growth, depending on a company’s stage, cash flow, and expansion plans. However, early-stage startups should be cautious with debt if they do not have clear visibility into future cash flow. There are two common ways to access debt financing:

a. A traditional loan is a viable option if a company has stable revenue and can manage repayments without straining operations. Loans are a lower-cost alternative to equity financing, as they do not dilute ownership. They are best suited for funding working capital, equipment, or expansion when there is a clear ability to service the debt. Traditional loans are available from banks, venture debt providers, or the Small Business Administration (SBA), all of which typically offer structured repayment terms.

b. A bridge loan is another way to inject funding into the company. This short-term financing option is used to cover funding gaps between equity rounds or pending cash inflows. While bridge loans provide flexibility, they often come with higher interest rates or equity dilution, making them a riskier choice.