Here’s something that sounds obvious but almost everyone ignores, run your business on actual cash, not accounting profits. Why? Because you can’t pay employees with a P&L statement. Your landlord won’t accept a beautiful profit projection. Everyone wants real money in the bank. So track what actually matters, money in versus money out. That’s it.
More coming in than going out? You’re profitable. The other way around? You’re burning cash and on borrowed time.
To make sense of where your money’s actually going, break expenses into three categories:
Sales expenses are directly tied to selling: cost of goods sold, sales commissions, customer acquisition costs.
Stable expenses are your fixed costs that hit every month regardless: Salaries, rent, overhead. In tech startups, salaries usually eat up 70-80% of your budget. These are the rigid, recurring expenses whether you make a sale or not.
One-time expenses are the big, non-recurring hits: Building out a lab, paying a major consulting fee.
This breakdown shows you where your cash actually goes and what you can control.
And here’s what really matters, the moment you hit positive cash flow, everything changes. A business that depends on investors to cover losses is playing a finite game. Your lifespan is literally determined by your burn rate, it’s just math counting down. But a profitable company? You’re independent. Sustainable. When an investor or buyer shows up with unfavorable terms, you can say “no” because you don’t need them to survive.
That’s the difference between controlling your destiny and being at the mercy of whoever writes the next check.
