Up and Running

APRIL 6, 2020

This can be a daunting task, but the best place to start is understanding and calculating your cash burn rate and your cash runway. How do you calculate the burn rate? This total number is your Gross Burn Rate. Gross burn rate = (Total variable expenses + Total fixed expenses).

Burn Rate 100

Burn Rate Forecast SBA Cash Position 100

Berkonomics

OCTOBER 5, 2023

Fixed overhead for salaries, rent, equipment leases and more make up the majority of the “burn rate” (monthly expenses) for most companies. Since this number is budgeted and pre-authorized, managers tend to focus upon other things such as sales, marketing and product development issues. The art of good management.

Silicon Valley 118

Silicon Valley Burn Rate Angel Investor Down Round 118

Startup Professionals Musings

SEPTEMBER 14, 2016

Investors check your burn rate to assess your efficiency, and project your remaining runway before you run out of money and into a brick wall. It doesn’t take a financial genius to recognize that you need to keep your burn rate low. Cash flow out equates to burn rate, and the runway depends on your reserves.

Burn Rate 120

Burn Rate Hockey Stick Startup Salary 120

Startup Professionals Musings

OCTOBER 16, 2023

Projecting financials is a natural extension of the homework every entrepreneur needs to do on customer opportunity size, product costs, pricing, competition and customer value. Per-unit cost less cost of goods sold is your gross profit or margin. Forecast sales-volume expectations. Quantify overhead costs.

Forecast 290

Forecast Burn Rate Widget Business Plan 290

Steve Blank

SEPTEMBER 3, 2014

As he was learning from potential customers and providers he would ask, “What if we could have an app that allowed you to schedule low cost moves?” Speed keeps cash burn rate down while allowing you to converge on a repeatable and scalable business model. This was a great call.

Cofounder 336

Cofounder Founder Technical Cofounder San Diego 336

Steve Blank

FEBRUARY 13, 2024

Marketing and capital expenses (new factory, high R&D expense) were predicated on consumer-scale sales. We’ll sell them the CDROM drives as well.” (The Kodak CDROM drives were the size of professional audio equipment and depending on the model, costing $600-$1000 in today’s dollars.) (And So what’s the lesson for Apple?

Search 256

Search Marketing Forecast Burn Rate 256

Up and Running

APRIL 30, 2020

.” It’s been a favorite management tool of mine since my time as VP for a market research firm, and it’s a method I used for decades growing a software company from zero to well over $10 million in annual sales. Impact on sales: If sales go down 30%? What is a scenario analysis? Will businesses open slowly?

Forecast 120

Forecast Balance Sheet Burn Rate Software Review 120

Startup Professionals Musings

FEBRUARY 5, 2021

If you don’t have a destination, don’t waste your money trying to get there, and don’t expect anyone to support you along the way Projecting financials is a natural extension of the homework every entrepreneur needs to do on customer opportunity size, product costs, pricing, competition and customer value. Forecast sales-volume expectations.

Forecast 369

Forecast Burn Rate Startup Widget 369

Both Sides of the Table

SEPTEMBER 29, 2009

Three reasons: There is a relative valuation between the price a VC pays and their expectations of what it will exit for in an IPO or trade sale. Also, it’s harder to pay a $30 million pre-money value on an unproved company when you see public companies with $100 million in sales trading for less than $20 million.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Up and Running

FEBRUARY 20, 2015

If you’re running a subscription business , you’ll want to track churn rate, monthly recurring revenue, lifetime value, and so on. However, there are a number of metrics that every business owner should know, including cash flow, accounts payable, accounts receivable, direct costs, operating margin, net profit, and cash burn rate.

Metrics 60

Metrics Burn Rate .Net Churn Rate 60

Up and Running

APRIL 22, 2020

Maintaining your business through the coronavirus crisis has likely led you to cut costs, revise your sales projections, and potentially seek out a loan to help you stay afloat. Many startups are small, local businesses with hopes of eventually rapidly scaling—but they’re still establishing a track record. Risky industry.

SBA 139

SBA Forecast Software Review Business Plan 139

Both Sides of the Table

NOVEMBER 3, 2009

In all of these new product and cost-focused new trends, a big problem has emerged that all of these movements have not addressed. Let’s start with how much value you think you’ll create for your customer if they use your product in terms of hours saved, costs avoided, extra sales, better conversion rates or whatever.

Business Plan 334

Business Plan AJAX Venture Capital Technical Review 334

Startup Professionals Musings

JUNE 18, 2012

I come from a high-tech software background, and only a few years ago, it would cost at least a million dollars ($1M) for a team of professionals to produce any commercial software product. Now, with open source software components, and low-cost development tools, the same job can be done by one good hacker for a few thousand dollars.

Cost 255

Cost SEM Burn Rate Startup 255

Berkonomics

AUGUST 10, 2017

Fixed overhead for salaries, rent, equipment leases and more make up the majority of the “burn rate” (monthly expenses) for most companies. Since this number is budgeted and pre-authorized, managers tend to focus upon other things such as sales, marketing and product development issues.

Silicon Valley 97

Silicon Valley Burn Rate Angel Investor Down Round 97

Up and Running

OCTOBER 7, 2019

A data-driven approach can help you make accurate and timely business decisions to meet market demands and improve cost-efficiency. Activation rate: measures how many visitors are engaging with your website or app. “What gets measured gets done.” . However, as a founder of a small business or startup, you’re juggling many things.

Founder 71

Founder Retention Metrics Technical Review 71

David Teten

NOVEMBER 26, 2019

Inevitably, things cost more and take longer than expected. Sean Colrock, Director of Client Partnerships at Wiss & Company , suggests at a minimum you track: cash on hand; fume date; and burn rate. I encourage entrepreneurs to correct course with a re-forecast early and often.

Agile 60

Agile Management Forecast Silicon Valley 60

Both Sides of the Table

DECEMBER 16, 2009

He asked each sales / biz dev person to call customers and tell them they had to change their contracts. I just knew that our sales sucked wind and we were burning through tons of cash. I advocated LOUDLY at the board that we needed to cut our burn rate. A new and experiened CEO was brought in and cleared house.

Entrepreneur 306

Entrepreneur Burn Rate Cofounder Sales 306

Both Sides of the Table

MAY 2, 2015

It’s such a tricky balance between being cost-focused & scrappy versus being impractical with how you spend your time. It freed up Ophir to grow out our sales organization, to work more closely with agencies, to innovate on product and to raise capital. They can show the projections on what this does to burn rate.

Operations 150

Operations Metrics Early Stage Non-Compete 150

Feld Thoughts

NOVEMBER 18, 2013

Convertible debt financings have become an increasingly attractive approach for seed rounds because it delays the valuation discussion, costs less from a legal standpoint, and is an easier financial instrument to “keep raising more small amounts of money” on. There is $350k left in the bank. Seven months in, there is a beta product.

Burn Rate 152

Burn Rate Equity Software Review Early Stage 152

Startup Professionals Musings

DECEMBER 11, 2017

From my perspective, projecting financial returns is part of the homework every business person needs to do in sizing customer opportunity, product costs, pricing, competition and customer value, before expending their own resources in a highly risky venture. Per-unit cost less your cost per unit sold is your gross profit margin.

Burn Rate 144

Burn Rate Forecast Angel Investor Revenue 144

Gust

JUNE 10, 2012

I come from a high-tech software background, and only a few years ago, it would cost at least a million dollars ($1M) for a team of professionals to produce any commercial software product. Now, with open source software components, and low-cost development tools, the same job can be done by one good hacker for a few thousand dollars.

Cost 139

Cost Burn Rate SEM Startup 139

Steve Blank

SEPTEMBER 7, 2009

.&# In the next posts that follow, I’ll describe how this model’s failures led to the Customer Development Model – offering a new way to approach startup sales and marketing activities. Three to six months after first customer ship, if Sales starts missing its numbers, the board gets concerned. The board raises a collective eyebrow.

Customer Development 224

Customer Development Developer Customer Silicon Valley 224

Berkonomics

APRIL 16, 2020

Rent and other fixed costs continue, even when revenues have dried up – a fatal combination. FINANCIAL: Do you have twelve to eighteen months of cash to cover your “burn rate” now and as you recover? Plan for reductions in fixed overhead, salaries, and other costs now. So, here are three urgent questions for you.

SBA 87

SBA Burn Rate Salary Stock 87

Both Sides of the Table

JULY 16, 2013

The company with no revenue and a $150k burn rate that raised $2.5 I often wonder why they didn’t find a way to bring in some revenue to cover costs. In this situation I think we should be increasing burn rate and not immediately focusing on revenue [I do sometimes believe this]. I see this weekly.

Burn Rate 412

Burn Rate Dilution Revenue Valuation 412

Startup Professionals Musings

JULY 27, 2014

It wasn’t so many years ago that starting a new e-commerce business on the Internet was a complex custom development project, usually costing a million dollars or more. Almost anyone can start a company today on a shoestring budget, following these cost-cutting recommendations: Establish a solid legal structure for your business.

Entrepreneur 260

Entrepreneur Burn Rate Social Media LLC 260

Both Sides of the Table

JUNE 17, 2017

The most obvious way to explain this is with sales people. If you hire 6 senior sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business 6 months. They don’t want high burn rates but they will never fund slow growth.

Stock Options 227

Stock Options Startup Dilution Venture Capital 227

Berkonomics

MARCH 30, 2010

Fixed overhead for salaries, rent, equipment leases and more make up the majority of the “burn rate” (monthly expenses) for most companies. What most managers miss is that every month cut from the time it takes to perform such tasks cuts the cost by the value of a month’s worth of fixed overhead or burn.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

YoungUpstarts

JUNE 17, 2019

Startups are regarded for their embrace of industry disruption, all the while constantly trying to limit their burn rate and conserving their capital for future growth. For example, let’s say your business needs to generate $100,000 each month in sales to make a profit. Again, this cuts down on costs and saves time.

Marketing 127

Marketing Startup Burn Rate Advertising 127

Steve Blank

FEBRUARY 22, 2010

An early indication that you’ve found the right business model is when you believe the cost of getting customers will be less than the revenues the customers will generate. For web startups, this is when the cost of customer acquisition is less than the lifetime value of that customer. Cost Per Acquisition Paid. Web Metrics.

Balance Sheet 298

Balance Sheet Startup Burn Rate Metrics 298

Startup Professionals Musings

FEBRUARY 15, 2011

I come from a high-tech software background, and only a few years ago, it would cost at least a million dollars ($1M) for a team of professionals to produce any commercial software product. Now, with open source software components, and low-cost development tools, the same job can be done by one good hacker for a few thousand dollars.

Entrepreneur 235

Entrepreneur Burn Rate SEM Social Network 235

Startup Professionals Musings

AUGUST 27, 2012

Explain in analogies your mother could understand, and quantify the “cost-of-pain” in dollars or time. Marketing, sales, and partners. Describe marketing strategy, sales plan, licensing, and partnership plans. Show breakeven point, burn rate, and growth assumptions. Give the “elevator pitch” for your startup.

Elevator Pitch 247

Elevator Pitch Exit Strategy Burn Rate Merger 247

Up and Running

MARCH 26, 2020

Acknowledging a continued decline in sales and the need to lower expenses is obvious. Sales dropped suddenly. The companies with a good planning process turned to their plans and quickly adjusted costs, expenses, marketing, and so forth to deal with the change. Review payroll: For most businesses, payroll is the biggest cost.

Management 152

Management Forecast SBA Burn Rate 152

Up and Running

SEPTEMBER 17, 2014

It is crucial for entrepreneurs to understand their costs of goods and services. Keeping track of gross margin assures you know the value of each additional sale. This is the rate at which a company uses up its capital to finance overhead before generating positive cash flow from operations. Gross Margin.

Metrics 146

Metrics Burn Rate Entrepreneur Forecast 146

Startup Professionals Musings

JANUARY 4, 2015

If you don’t have a destination, don’t waste your money trying to get there, and don’t expect anyone to support you along the way Projecting financials is a natural extension of the homework every entrepreneur needs to do on customer opportunity size, product costs, pricing, competition and customer value. Forecast sales-volume expectations.

Forecast 120

Forecast Entrepreneur Burn Rate Widget 120

Up and Running

FEBRUARY 13, 2013

Gross margin: sales less cost of sales. And not just for the whole business, but for each of the main lines of sales. Cost of sales means direct cost. Anybody making products needs to know what each unit costs. . Burn rate: what’s your normal spending level. That includes:

Burn Rate 74

Burn Rate Sales Cost Product 74

Startup Professionals Musings

JUNE 10, 2011

Explain in analogies your mother could understand, and quantify the “cost-of-pain” in dollars or time. Marketing, sales, and partners. Describe marketing strategy, sales plan, licensing, and partnership plans. Show breakeven point, burn rate, and growth assumptions. Give the “elevator pitch” for your startup.

Elevator Pitch 234

Elevator Pitch Exit Strategy Burn Rate Merger 234

Startup Professionals Musings

AUGUST 7, 2015

Every customer understands that your solution has to generate more revenue than cost, but you should not put that data in a customer pitch. Specific elements of your marketing and sales plans. If we build it they will come” is not a marketing and sales strategy. How the solution and business model work to fund the business.

Product 120

Product Intellectual Property Liquidity Event Burn Rate 120