Скачать или смотреть Ways To Cut Your Startup’s Cash Burn Rate On A Budget!

If you are a business owner, may it be a startup or an established company, you should know by now the importance of determining the burn rate. A company’s cash burn rate, to put it simply, refers to the company’s cash consumption over time.

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Basically, runway is defined as your total cash in your bank account, divided by your average monthly spend. And that's how many months you have left. And so right now, we're recording this in July, 2022. There's a lot of startups that are stretching, making changes, making sure they extend their runway, ideally out to 18 months, something like that. And so, hey, I thought I'd give you a couple quick ideas.

Next up, cutting the snacks in the office, all that kind of stuff, if you are even working in an office, a lot of companies are working remote these days. But it's not fun to do, it's kind of unpopular, but it also has the side benefit of sending a message to the team that, hey, we don't want to do this, but it's something necessary. We all have to save a little bit and look for cost savings opportunities. So it's not just the money you save with cutting the snacks and food and all that kind of stuff. But it's actually the subconscious or conscious message you're sending to folks. Another one which I really hate to recommend, but it is something to do if you're finding yourself in trouble and really need to extend your runway, which is, either cut back or fire your PR firm. if you don't have revenue.

Now, another thing to think about with cutting your burn rate is, about 70 percent, maybe 75 percent of most startups' costs are people costs. I'm talking salary, benefits, all that kind of stuff. And so I hate to say it, but one of the ways you can extend your runway is by either reducing head count, or you can do a 10 or 20 percent pay cut across the board.

And so you want to be careful here because cutting 10 or 20 percent of everyone's salary might scare a lot of people, so the strongest people may actually leave. They also may feel like they're being targeted, despite all the value they create for your company. And really, at the end of the day, personnel people, that usually is the most, kind of the intellectual power and where the company's going to go. Those people are really what drive everything so you've got to be really careful. I prefer to also do, or instead of doing that, do a check-in with each VP and just talk to them about performance.

Another thing, by the way, if you haven't taken venture debt, that's another really good way of extending your runway. Lenders love following the top-tier VCs into startups that are doing well, that have traction, who just need three to six more months of runway, so that's a really good opportunity. We have tons of content on venture debt so just Google Kruze venture debt and you'll find all of our videos and webpage on that. Something else to do, this is just an exercise I like to do every month in the Kruze financials, is, I just go through our general ledger and for any accountant worth their salt should be sending you your income statement, balance sheet, cash flow statement, supporting documentation like rev rec schedules, prepay schedule, balance sheet schedules, all that stuff, and general ledger.

Another way of looking at things, also, you find SaaS subscriptions there that you unsubscribed a year ago, but they kept billing you, stuff like that. Another thing you can do is look at a variance analysis. In our financial package, we provide a variance analysis. You can see chart of account categories, like web services or travel or office expenses, you can see them fluctuate. And those fluctuations will often allow you to see a cost savings opportunity, so I really like that. This is something we're starting to see now at Kruze quite a bit, which is people re-outsourcing their accounting. I did another video on this, so just put into YouTube re-outsource your accounting, or something like that, with Kruze in it.

And ideally you're walking through that with a financial advisor, at Kruze, of course, we do that, but maybe it's someone internal at your company or just a friend, someone who's very financially savvy and wants to help your startup succeed and just spends a little bit of time with you every month. So budget to actuals can be your friend, big time.

So I hope that helps, there's a lot of ideas on how to cut burn. If you're a startup, this is a question we get a lot right now. Unfortunately it's a tougher time in the market and so hopefully these ideas help. If you have other questions on this or extending your runway, or budget to actuals, financial models, hit us up at kruzeconsulting.com, and please subscribe to our YouTube video. Thank you so much.