Founder Money & How to Think About it : A Quick & Rough Mental Model
Updated: Oct 23, 2021
The biggest reason Founders bank accounts and company bank accounts do not increase is because there is no reason for it. Most Founders do not have something to re-invest capital into that will make their lives, missions, and team's lives better. Therefore they find themselves with empty bank accounts throughout their lives, even after they have massive (or even mediocre) successes. If that sounds familiar, keep reading.
The difference between unsuccessful and successful Founders lies in two main things
A. Are you consistently impacting the world more every year
B. Are you consistently generating more money each year so that you can impact the world more while you and your team live a high quality life
This is a quick mental model about the second.
Income/Revenue: The money you receive for selling products, services, or licenses
Expenses: Anything you pay for thats required to run your life and business other than interest on debt
Savings: What's leftover
Bank: Money you put into your business and personal bank accounts
Liabilities: Things that cost you money, sometimes on a yearly or monthly basis
Free Cashflow: Money from profit outside of whats allocated for re-investment into the business
Assets: Anything that will produce you money in the future
Employees/Solofounders look to increase their bank accounts so that they can pay liabilities.
Startup Founders with teams look to reduce their liabilities while massively increasing their assets. This causes a snowball effect with their revenue when done profitably.
There are 4 types of Assets that you want to leverage.
Here's some examples of the above when they're assets:
Cash on Hand
Investment into long play
Collateral for Debt or Proof of a Business Model
Profitable Product Team
Profitable Sales and Marketing Team
External Media: anything thats customer facing that replaces labor, capital, or tech
Internal Media: anything internal facing that increases your labor asset
External Tech: anything thats customer facing that makes labor or capital more efficient
Internal Tech: anything thats internal facing that makes your labor more efficient
Pick a high value problem that you have and solve it with an asset. I recommend deciding which asset to invest in at least once a quarter and having some sort of prioritization framework to do so. As you consistently build your assets, your ups and your downs will consistently trend higher and you can walk towards your goal with the certain type of confidence that only progress can bring.