1/ What I have been saying until recently in "normal times" is for founders to do some scenario planning and look for the break point where not having the cash in the bank makes the difference between the business surviving or getting shut down in a cashflow crunch https://twitter.com/cgimmer/status/1246062858447851520

2/ With 6 months expenses in the bank, the business can take a one-time hit of 50-60% MRR and have 12 months of runway to: not reduce any other costs or lay off staff, figure out the problem, and recover. In normal times this feels like a good cushion to me

3/ But depends heavily on the scenario planning & amount of "slack" in the business. How dependent on spending is your customer acquisition; could you cut it and keep growing? How lean is your team already; could you cut costs there and keep the core product quality up?

4/ Cash in the bank has an opportunity cost. *In most cases* for a business, higher MRR is a better defense against uncertainty than cash in the bank. So there is a real cost to holding too much cash if you have ways of converting it into recurring revenue growth.

5/ But the beauty of being bootstrapped (or I'd argue working with bootstrap-aligned investors) is you can be okay with that opportunity cost, play more conservative, and hold more cash than you really need if it helps you sleep better at night.

6/ But if you look at say 12+ of current expenses, you can run the scenario and say "how likely is a 100% drop in MRR + I decide to keep all my expenses and plow cash into trying to rebuild the business? Or a 50% hit with no growth recovery for 2 years?" and so on

7/ My sense is 9 times out of 10 a hit that bad to the business economics is indicative of a fundamental market shift that means the best plan is shut the business down rather than drain cash to rebuild. Businesses don't *have* to survive like people do.

8/ That has been and probably still is my thoughts on "normal times" but what about now in very much not normal times? I think you do the same scenario analysis bearing in mind the current covid reality https://twitter.com/tylertringas/status/1244326517641031681?s=20

9/ The answer per business will depend on the same variables: risk appetite, founder finances, slack in the business, market dynamics, is your business fragile or anti-fragile to this moment. But the aperture of reasonable outcomes widens substantially.

10/ For most businesses there's a case to be made for cutting costs, hunkering down, maximizing your business and personal runway. These are not normal times and the best bet may be to just survive.

11/ But this is also a moment when bootstrappers could potentially thrive. VC-funded startups have to massively cut costs now and spend a huge amount of focus fundraising. Bootstrappers may be able to make aggressive bets knowing they can cut to break-even quickly if needed

12/ So I guess what I'm saying is... there's a lot to consider and it depends

Note: I think the analysis make sense for all businesses but the numbers and thinking are biased towards SaaS. Very different equation for businesses with any meaningful CoGS, different margins, etc.