By now you know that running out of cash is a bad idea. But this concept is not as simple as restricting spending. Oftentimes ventures plan to spend more than they have in the bank as they grow. That is$,$ they plan to run out of cash, and know they will have to raise money from some source before they hit the fume date.

A company truly runs out of cash when it can no longer convince someone that they should give the venture more resources. If there is still customer value to be created and captured, companies can usually get access to money. The terms may not be ideal but that is not the same as being unable to get capital under any terms.

Remember that our basic definition of entrepreneurship is the pursuit of opportunity beyond the resources currently controlled. Resources is a very broad term and includes everything from employees to suppliers to investors. If a key supplier cuts off a venture, that can have the same devastating impact on a venture as running out of cash. Resource suppliers are ultimately investors too. They are placing a bet on the potential success of the venture, as illustrated by the Chinese manufacturing partner at Dr$.$ John$$s$.$

Entrepreneurship is an exercise in building and maintaining trust. Entrepreneurial founders get kicked off the team if others lose faith in them. Ventures fail when investors and others no longer believe that backing them is a good idea.

Another piece of advice: don$$t try to raise money too close to the fume date.

Why do you think that might be true?