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The number one rule for medtech entrepreneurs

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In the third part of his Reluctant Entrepreneur series for Health Tech World, Dr DJ Hamblin-Brown shares his number one rule for doing business as an entrepreneur.

It may seem incredible to the modern mind that for much of human history blood was considered a humour; a static receptacle of various qualities. The conception of a fixed circulating compartment of fluid is of relatively recent history, attributed in its most modern form to William Harvey and enhanced by physiologists and anatomists since.

What was clear to everyone throughout history, however, was that blood was pretty important stuff. If you lost yours – on the battlefield or on the operating table – your time was up.

For business people, the cash-is-blood metaphor also has a long history, to the point of cliché. However, like the blood-is-life metaphor, its truth is hard to overstate. Even with modern resuscitative measures, the total loss of circulating blood volume in trauma is an endpoint from which it is impossible to recover. Even losing  50% is nearly always fatal. The remaining blood stagnates, clots and the end comes quickly.

Similarly, a drastic reduction in liquidity is nearly always fatal for a business. No cash means no business, but not-enough-cash can also rapidly result in the same end. Unpaid workers leave or sue, creditors dry up and the end comes quickly.

A few months ago, I attended a webinar for budding entrepreneurs and a handsome investor-type with a hypomanic presentation style asked an opening question: “What is your most important job as a CEO?”.

Much unmuted muttering and chat-box replies ensued: “team development”, “creating a winning product”, “understanding your market” were all quickly posited. These were all firmly contradicted by the man in frame. “No, no no! Your most important job – in fact your only real job – is NOT TO RUN OUT OF MONEY!”

I share this, because the unnerving truth of this statement hit home. And so I bring it to your attention as the first of our ten most important rules of being an entrepreneur.

I sat for a moment chastened and (were anyone to have been able to see) somewhat red faced. For the truth was that, at the time, my business was on death’s door. The money had run out… and we were not going to survive another month. As it happens, the story ends happily because the business was slowly transfused from savings, family, friends and a thankful boost from a coronavirus bounceback loan – all until the next round of funding came.

So I bequeath this rule to you as the first and foremost rule of doing business as an entrepreneur:

RULE 1: DO NOT RUN OUT OF MONEY

You may accuse me of not being very helpful here. Not running out of money is a counterfactual result – but it is not an activity that you can undertake on a Monday morning, nor is it an attitude that you can strike to make you and your staff feel better. It is neither being nor doing.

So what, in my view are the activities and attitudes that might prevent your business from running out of money. Here are just a few tips that I’ve picked up:

  • Draw the graph: work out when your current spend rate will cause you to run out of money. Don’t assume any uncontracted income (and even then, assume it will be late – maybe 3 months, or even 6 months if it’s the NHS). Then plan to extend that as long as you possibly can.
  • Don’t spend it. Again, something of a truism. But there are many insidious calls on your business’ money. Marketing, advertising, PR, travel, sundry expenses, replacement PCs…If you can, just say no to all of these until you have a runway that is long enough.
  • Contract, don’t employ – you need to be able to turn costs on and off. Usually off. Given that staff are likely to be your largest drain on cash flow, don’t make the promises that employment entails. Keep work flexible. Keep your contractors tight to their commitments. 
  • Focus on the front: sales will save your business. More on this in the next rule.
  • Always be raising: this was the insight of the webinar. If you’re not asking investors for money, they won’t give it to you. And (at least for most MedTech companies) investment is the source of almost all cash during the startup years.

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  1. Pingback: Health tech's reluctant entrepreneur: How to have purpose

  2. Pingback: What a UK recession could mean for health tech | Health Tech World

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