I've seen firsthand how startups and new entrepreneurs can quickly burn through funding. It's easy to get excited and start spending money on things they think they need, like marketing and office space. But without a solid financial plan, these expenses can quickly add up and leave little runway. It's important to budget wisely and understand your daily/weekly burn rate. This means tracking how much money you are spending and making sure that it's sustainable. It also means being selective about where you spend money. Certain things can wait until the startup has sales (or even a product or service that people want) I know it's tempting to spend money when you have it, but it's important to be patient and strategic.

A general rule of thumb is to 𝗵𝗮𝘃𝗲 𝗲𝗻𝗼𝘂𝗴𝗵 𝗺𝗼𝗻𝗲𝘆 𝘁𝗼 𝗹𝗮𝘀𝘁 𝘆𝗼𝘂 𝗳𝗼𝗿 𝟲 𝗺𝗼𝗻𝘁𝗵𝘀. If it's less than this, then you've entered the danger zone, and you must seek a way to either reduce costs or acquire funds.

To effectively manage your burn rate, consider implementing a rolling budget strategy. Instead of relying solely on static annual budgets, break your financial planning into shorter intervals.

I believe that understanding your burn rate is paramount in avoiding financial pitfalls. From my experience, meticulously tracking both fixed and variable costs is essential. By doing so, you can gain a clear perspective on your cash flow and make informed decisions about when to secure additional funding or implement cost-saving measures, ensuring the long-term sustainability of your business.

I have always been wary of the whole concept of going behind growth at the cost of profitability. if you get your unit economics right from day 0 then things will always go in the correct direction. you may be slow(er) but at least you are making money and not burning cash for the sake of it

One effective way to extend your runway is by adopting lean business practices. This approach involves identifying and eliminating inefficiencies.

To sustain your business's runway effectively, adopt these strategies: 1. Diverse Income Sources: multiple revenue streams. 2. Lean Operations: Continuously optimize processes, cut unnecessary expenses. 3. Prudent Budgeting: Underestimate revenue , overestimate expenses. 4. Cash Flow Control 5. Customer Retention 6. Emergency Fund 7. Strategic Investments: Reinvest profits wisely for growth. 8. Debt Management 9. Continuous Monitoring: Track KPIs. Use AI for proactive course corrections. 10.Scenario Planning: Develop contingency plans. First casualty is always a plan. 11. Funding Options: Explore sources . 12. Adaptability: Be ready to pivot as needed. 13. Expert Guidance: Ask for it. At Max one may deny but what if the expert agrees.

When planning your run way, it is important to add a safety funds and label this the unknown. You will encounter “something” that was not planned. This way you have an emergency fund for this unknown. Half the battle is planning for the unknown.

To efficiently reach your breakeven point: 1. Price Optimization: Adjust pricing for a better contribution margin. 2. Cost Control: Monitor and reduce variable costs per unit. 3. Increase Sales: Market effectively to boost sales volume. 4. Product-Market Fit: Align offerings with customer needs. Be ready to change if needed. 5. Efficient Operations: Streamline processes for cost savings. 6. Budget Wisely: Allocate resources strategically. 7. Data Monitoring: Track progress with KPIs and adapt. 8. Cash Flow Management: Ensure resources for the journey. 9. Risk Preparedness: Plan for unexpected challenges. 10. Expert Advice: Consult industry mentors for guidance. 11. Persistence: Stay committed to your breakeven goal.

Alongside those already mentioned, remove/stop cash draining activities and none profitable products (limit your scope of offerings).

calculating the BEP is important. this is not as easy as it seems, because one has to make sure that all the input costs are accounted for. this is a engaging exercise, and one needs to invest mindspace to get to the end of the tunnel of all the costs incurred for COG/SS sit down with a spreadsheet and note down all your monthly expenses and make sure you are aware of outliers and see if it makes sense to amortise them. good luck!

No one helps a dying business for the sake of helping; you need to make them see, with predictive analysis and a 𝘄𝗲𝗹𝗹-𝗲𝘅𝗲𝗰𝘂𝘁𝗲𝗱 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗳𝗼𝗿𝗲𝗰𝗮𝘀𝘁, that they will rescue you from closing, and in return, they'll make profits in the long run.

It's crucial to exhaustively explore your funding avenues. I believe that understanding the intricacies of each funding option, whether it's personal savings, crowdfunding, or venture capital, is essential. By doing so, you can tailor your approach, create a persuasive pitch, and cultivate meaningful connections with potential backers, ensuring a robust financial foundation for your business.

Customer money >>> investor money, so get to selling!! I see sooo many young (and even more mature) companies hooked on the allure of outside capital. Yes, it’s sexy to say you raised $Xm in VC, but that’s often the wrong route. If you have a good product, find people to pay you for it rather than offer free access to try to generate (often fake) growth for investors’ sake. Customer money will 💵 get you actual cash to extend your runway ✅ validate you’re building something people find valuable enough to pay for 📈 make your company more valuable IF you want to raise

Businesses need to get into the habit at the very beginning of monitoring cash flow. Have an online accounting system where you input everything, or if you don't have the money, at least track it on all Excel (my least favourite option). Consistently monitor where your money is going and identify if there are things you're paying for that you no longer need. A very common money drain for entrepreneurs are things like subscriptions. They often get purchased for an initial need which is no longer required in the business and then they forget to cancel. Having a Google Sheet where every subscription is listed, the amount and the renewal date is a great way to stay on top of these, and cut them quickly when you no longer need them.

By regularly updating your cash flow forecast, you can make informed financial decisions, such as adjusting spending, seeking additional financing, or strategically investing in growth opportunities.

How do you avoid running out of money? That is a very good question! One of the main mistakes, I have made in my startups. I was developing the solutions too early. Now I know: First you need to sell your product (based on a prototype or mockup); then start developing and producing it. This is THE best way to avoid running out of money.

Because money is available does not mean you can afford certain expenses. Go for optimum utility when you have to incur costs, that way you can derive best value for money. Put simply, If you will not fully make use of a good or service, then do not spend money on it.

Don’t spend money on crazy things like helicopter rides when you’re pre-revenue. One time a client took me on an insane trip to an island, we have helicopters, golf carts, and ton of crazy stuff. We had fun, but I knew that company wouldn’t exists in a year and I was very much right about that. Just because you can spend it doesn’t mean you should. Discipline will save you so much money!