Running Out of Runway? What Founders Should Do Next

Most founders don’t talk about this moment.

When you realise you’re running out of runway…and the clock is ticking.

In this Peer Effect Postbag, James Johnson and Freddie Birley break down what actually matters when you're in that position:

•  The 3 real options you have (cut costs, grow, or fundraise) 
•  Why running out of runway can force clarity and focus
•  How pressure can increase performance (until it breaks you)
•  Whether you should tell your team or not
•  And how to avoid the mental spiral that kills execution

This isn’t theory.
 It’s the reality founders deal with at 2 AM.

More from James:

Connect with James on LinkedIn or at peer-effect.com 

Transcript

SPEAKER_00 0:00

Welcome to the Pure Effect Post Bag. I'm James Johnson joined by Freddie Burley. We ask for your questions, and Freddie and I are going to tackle them together. These aren't theoretical case studies, it's the stuff keeping you up at 2 a.m. Let's get answering. Welcome to the Pure Effect Post Bag. I'm James Johnson.

SPEAKER_01 0:19

I'm Freddie Burley.

SPEAKER_00 0:21

So, Freddie, what have we been up to this week?

SPEAKER_01 0:24

So this week um I bought back the big night out. I feel like I had I know I haven't I don't really go out anymore. And I had a couple of actually just hilarious nights out, and it's not I don't know how to describe it, but it just gave me this quite um it's kind of like nostalgic and really funny and quite delirious and gave me a lot of joy. Um and especially because I don't really drink that much anymore. Sometimes having a couple of really big nights out is just good for the soul. So that's that's my takeaway from the last week.

SPEAKER_00 1:02

Was this with like sort of like sort of old friends, new friends?

SPEAKER_01 1:06

Um a combination. One night was with really, really good old school friends, and another was like a kind of just a really random mix of people that were hilarious, and I just had a really good time.

SPEAKER_00 1:20

I think that that human connection is something that we we forget about, isn't it? And that's just sometimes anything that helps deepen that connection is is very nourishing.

SPEAKER_01 1:30

And also just the freedom and funniness. If I find with nights out, it's like anything can happen. And you just take yourself on a little adventure around London, go to all these different places, and you're like, that was absolutely hysterical. And then you're debriefing on the stories the next day, and you're like, I wouldn't recommend it a lot. It definitely had cons as well as pros. But it was just it was just very funny.

SPEAKER_00 1:49

But there's a reason why most companies there go to for team building is nights out.

SPEAKER_01 1:54

Yeah. Yeah, true.

SPEAKER_00 1:56

It's kind of cheap, much cheaper than taking taking everyone off to do like paintballing or something like that.

SPEAKER_01 2:00

Or Namco. Bring back Namco. Um, yeah.

SPEAKER_00 2:05

So question from Dave. Running out of runway, what do I do? Yeah.

SPEAKER_01 2:14

Okay. Um big one. So I mean strategically speaking, you kind of have three options. It's either kind of reduce your costs, um, increase your sales, or fundraise. Those are kind of the options on the table. For most people that are coming up against that question, the the options or the strategy isn't necessarily the challenge for them. It's it's the mindset and the fear of starting to feel the pinch of, okay, we've only got six, seven, eight, nine, twelve, like somewhere between six and twelve months, I find is when people start having this worry. And um it's this fear of like what happens if we need to shut down, what happens for me like reputationally, what happens for me, um, the impact on our team, the impact on our customers, the impact on ourselves. And so I think the first thing is always like managing your mindset. So, how do you get yourself into a mindset that allows you to be focused and think clearly about what the different options are? Put together your strategy and execute and execute um in a really focused way. So I think that's often the most important piece. The question I often talk to my clients about is like, what is the beauty of this current situation? So, what are the benefits of running out of runway right now? And often it's a bit like, what do you mean? That's there's this is never a good thing. And when you actually start to think about it, running out of runway enforces focus. You don't have time for bullshit, you don't have time for the kind of slacking, beating around the bush. You've got to be hyper-focused, you've got to prioritize really well, you've got to be really clear. Also, as a leader, you have to step up because you have this, you need to rally the troops around things that are most important. And so often it forces you to grow as a leader in a way that you wouldn't when you're hyper-comfortable or you have a lot of um money in the bank. I think it also helps you work on your mindset, it helps you stay focused, it helps you operate under a lot of uncertainty. I'm being trained on so many different dimensions. And I often find in life, sometimes when you're going through a season of chaos, it's not just chaos in the company. There'll be chaos in maybe your relationship or in your family dynamics or um health scare happens. And it seems like there's just so many different things that come up. And so sometimes there's this moment of like kind of surrender where you're like, hands up, I have so much going on that I can't control all of these things in the way that I used to be able to control. I just have to double down on what's in my control, stay in my lane. Sometimes that can give you this energy of like, let's go with a ride, like let's see where life takes us. But I want to give it my best shot. And sometimes I think it increases the courage and the energy of courage because you have no other option. And so it brings out parts of you that wouldn't be there if you weren't in what you would describe as a crisis.

SPEAKER_00 4:54

Also it's like dials up the resourcefulness.

SPEAKER_01 4:57

Yes, exactly. Exactly. And it also often for people for a lot of founders, I've found that there can be a default is rely on self and deal with everything yourself. And sometimes in crises or moments where you're like, I genuinely don't know what to do, it forces you to break out of the shell of self-reliance where it can be detrimental and into who are my trusted advisors and people that I can now rely on to help me. And so you actually start to build deeper bonds with core parts of your team, core parts of your board, maybe some investors, maybe some other fellow founders. And so you start to actually become more resilient, not just internally but externally, by building up a stronger network. And I found that to be another benefit of running out of runway.

SPEAKER_00 5:41

Is that a weird sort of thought around how it might map sort of the pressure performance curve where you start and you kind of got at low pressure, you have low performance, and as you increase your performance sort of peak, and then you start having too much pressure and your performance starts dipping again. And almost you can map that to runway. It feels like you start it and you go, Oh, I've got I've got two years to do this, and then actually there's a there's a sweet spot in terms of that pressure, and then when you've got sort of three months to go, you're like, I probably don't have time to sort this out.

SPEAKER_01 6:11

Yeah.

SPEAKER_00 6:12

Performance probably starts dips because you're too under pressure.

SPEAKER_01 6:15

Yeah.

SPEAKER_00 6:16

So I really like to know how you how it could be a beautiful how you make it a beautiful positive as opposed to a crippling negative.

SPEAKER_01 6:24

And I often think too, it's just like you might as well. Because like the re if that's the reality, what kind of experience do you want to have in your reality? Do you want to feel terrified and exhausted and stressed and angry, or do you want to have a reality in which you feel focused and like you're maximizing the opportunity in front of you, you're doubling down on what's in your control, you're rallying the troops. Like there's there's there's there's two different versions in how that story ends. And and if you if you choose the version where you're making the most of a hard circumstance, often you then get the most gain. Whereas if you kind of double down on the negatives and you self-employed, often that's the reality that you then create.

SPEAKER_00 7:01

Yeah, and I feel ties to the second part of the question, the data is sort of like, do I tell my team or not? And it feels like there's kind of like a protective denial space where you don't tell team, you're not transparent, you suck a lot of pressure yourself, and that feels like quite low performance and quite reaction to reactionary. Whereas actually, if you can be clear, you go out sort of fundraising is part of the game. This is probably once you start going down that journey, we are going to be in a fundraising cycle of 18 months, two years, two and a half years, whatever whatever it is. Yeah, therefore, there will be times when we are have less runway, and that's that's kind of part of the nature. Yeah. But it does mean we need to focus. This is kind of focused people's minds, feels like never waste a crisis, keep everyone really focused on the main goal. Because it can be quite easy to get complacent, I think. Particularly as you scale, because you feel as a bigger company is less likely to fail as more people, which actually is not necessarily the case because you've got more people to pay for.

SPEAKER_01 8:00

Yeah, it's so true. And I think the challenging that question of do we tell the team, do we not tell the team, there's no there's no right answer. It's so contextual. And I think if you have a culture that is already built around transparency and that sense of ownership and open dialogue, then it's much easier to update the team about where you're at and for them to already highly trust you because they feel the transparency, they feel the integrity, and therefore it can land really well and actually create a sense of urgency in the team that isn't you like pushing, you're just giving them the facts, and then it's obvious that things are urgent. The challenge can be is if you have a very intransparent culture, which often in transparency, there can also then be signals of if you're intransparent, it means that the team create their own narratives around what's going on. And so if you then throw what can be seen as challenging news into an intransparent culture where people already have narratives of their own, then what then it can create the fear which can dip performance. And so I think the the context is is really important when deciding do we discuss this with a team, do we not discuss this with a team? Because if you're bringing in like high risk, high crisis, could be challenging news, um that that can that can result in suboptimal performance. Um but again, it totally depends on the company, it depends on the leaders, it depends on the context. Um, but it's it can be either either way you go, there are valuable lessons to be learned once you do either fundraise or like adapt, and then the culture you want to build moving forwards, you can you can reconsider, you can look at.

SPEAKER_00 9:37

I I think the thing that really landed me there was this idea of like reframe it as a positive. Like if you look rather rather than assuming it's negative, how can you actually use that to your advantage? I think is a really nice way of turning it on its head. Nice. Well, that's us for another week. We will see you guys next Monday, as ever. Hit subscribe, and if you have any questions, just reach out at hello at peerffect.com. Thanks for listening and happy scaling.