Why Your Startup Needs Its Own Cash

Are your startup’s cash and personal cash being kept in the same pocket?

In other words, do you manage your startup’s expenses and personal expenses under the same account/controls, etc?

If you’re doing that, it’s time for you to change.

Okay, I get it. You have a ton of things on your mind right now. Why bother separating things at a so early stage?

Well, although it seems just mere bureaucracy, officially moving cash (and expenses control) from your personal account to your startup’s account must be a day-one priority.

Why? I’ll give you three reasons for that.

It Helps You Become Smart About Money

What’s the point in allocating a small amount to your startup? Let’s say $1,000. Or even less: $100.

A successful company demands way more than $100. Right?

Yep. But, that’s not the right way of thinking about it.

When you launch a startup, your short-term goal isn’t to build a “successful company”. Your first mission is to validate your startup hypothesis.

Will people really want your product? Will they pay for it? How will you get your first customers? How will you get traction?

To answer these questions, you don’t need a full-functioning company.

So, can you start validating your hypothesis with $100?

Definitely, YEAH!

You should see each dollar as a valuable resource to develop your startup.

When you see how much cash your startup has, you’ll start using your creativity about how to be effective (validating the riskiest assumptions) as well as efficient (in the cheapest possible way).

👉 Wanna be smart about your scarce cash? Check out these two posts:
5 ways to validate your startup’s solution.
9 cheap (but powerful) steps to get your startup idea going.

It Helps You Adopt A Business Mindset

Yes. Separating your money from your startup’s money is more than just bureaucracy.

It represents the foundation stone of your dream. It makes you think through your startup’s “mind” (business) and not yours (individual).

When you don’t define a specific amount of money for your startup, you end up seeing yourself and your startup as the same thing. You get the money to pay for your drinks from the same wallet you used to pay for your startup’s MVP.

That’s wrong.

If you cannot tell the difference between your startup’s money and your personal cash, you lose track of your actions.

Have you spent too much? How did you spend your startup’s money? How much is left?

The answers to these questions must be 100% clear in your mind.

Dreams don’t come true simply by a visionary mind. Besides an inspiring vision, you must develop, from day one, your cash management skills.

When you officially invest part of your cash in your startup, you begin thinking like an entrepreneur. You begin visualizing your startup as a separate entity. Since its cash boundaries are well-defined, every dollar must be an investment with an envisioned return.

It Saves You Energy

Sometimes, founders are simply scared about losing their money.

That’s why they keep it protected inside their bank accounts. Every time their startups need more money they decide whether to release it or not. But, why is it harmful anyway?

Because it drains your energy.

Every decision demands some level of energy. Even if the decisions you make in the early stage of your startup don’t seem too hard, they demand you to carefully consider them. And, little by little, it will exhaust you.

If you keep the money in your personal bank account, every decision refers to reducing your personal balance. Since we’re always considering saving our personal cash, these decisions cause you some level of stress.

On the other hand, the act of transferring some money to your startup’s account will free you from that struggle—all your startup’s cash is visible and that is not related to your money anymore.

Do It Now

Define the amount of cash you can invest in your startup today. It doesn’t matter how much it is. It just matters that you immediately proceed with the separation.

Below, I give you some suggestions depending on your current context:

If you didn’t register your startup yet, you don’t need to run to do it. However, it’s important to have an exclusive bank account to pay for its expenses. So, open a zero-fee personal account, and transfer the money to it. From now on, this account is exclusively your startup’s account.


With a simple, one-page Excel model, you’ll be ready to make the most out of your early-stage cash.

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© The Traction Stage 2020



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