{"id":1163,"date":"2017-04-18T06:39:17","date_gmt":"2017-04-18T06:39:17","guid":{"rendered":"http:\/\/www.mystartupcfo.com\/?p=1163"},"modified":"2018-10-23T12:12:25","modified_gmt":"2018-10-23T12:12:25","slug":"are-you-smarter-than-a-fifth-grader","status":"publish","type":"post","link":"https:\/\/mystartupcfo.com\/blog\/are-you-smarter-than-a-fifth-grader\/","title":{"rendered":"Are You Smarter Than A Fifth Grader?"},"content":{"rendered":"

After speaking with hundreds of CEOs, I realized that burn rate isn\u2019t as Startup101 as I had thought. There are still a lot of things that founders understand incorrectly when it comes to being a #BurnRateZombie<\/a>. But before we get into it\u2026<\/p>\n

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Let\u2019s take a pop quiz!<\/strong><\/span><\/h3>\n

Once upon a time, there was a CEO running a very promising startup. The company was all set to join the ultra-exclusive Unicorn club. It was valued at $900M, and this is how their cash inflows and outflows looked:<\/p>\n

\"\"<\/a><\/p>\n

(FYI, Singapore fifth-graders\u2019 are expected to take one minute to answer that.)<\/em><\/p>\n

Thinking $62M? Well, your math is as good as the fifth graders, but you should know better.<\/p>\n

Jason realized after all this burn that he doesn\u2019t have a business model. His company had become a #BurnRateZombie, so he sold all inventory, cut the staff, and finally offloaded the company for a special clearance price of $15M. Jason hems<\/a> for a living now.<\/p>\n

\"\"<\/a><\/p>\n

Burn Rate is very complicated. See if you understand this.<\/p>\n

Burn rate = Money that comes in \u2014 Money that goes\u00a0out<\/strong><\/h5>\n

No, don\u2019t mock. It\u2019s tougher than it looks. In fact, I\u2019ve had this talk with so many founders that I created this burn rate calculator to better illustrate my examples.<\/p>\n

You can run your numbers at this link: BURN RATE CALCULATOR<\/strong><\/a><\/p>\n

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Don\u2019t know what numbers to fill in? You need to contact us<\/b><\/a><\/strong>.<\/strong><\/p>\n<\/div>\n<\/div>\n<\/section>\n

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Jason wasn\u2019t paying attention to the red flags. But here is what you should be doing:<\/strong><\/p>\n

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  1. Sit regularly with your accountant<\/strong> and deep-dive into your numbers (I hope you have an accountant!). Beyond the bean counting (what\u2019s coming in and what\u2019s going out), you should have an overall sense of your financials. One thing about numbers \u2014 they don\u2019t lie. <\/strong>Know your top five buckets of expenses and analyze them for patterns. Look out for unexplained numbers and unusual variations in expense lines. Grill your accountant on and make sure she\/he knows the stuff.\u00a0\u00a0If you do not have an accountant, it\u2019s time you get in touch with companies that provide accounting services.\u00a0\u00a0<\/span><\/li>\n
  2. Ruthlessly track KPIs.<\/strong> Track your Key Performance Indicators and tweak your strategy based on what they are telling you. Do not forget that B2B and B2C businesses track different KPIs. For example, as a SaaS company, do you track your company\u2019s magic number<\/a>? A lot of disciplined operating KPI tracking goes into this number. But once you have the systems in place, the resulting insight for your business is priceless.<\/li>\n
  3. Keep your eyes and ears open.<\/strong> Keep an eye out on the market indicators for funding. For example, if the market is down, raising funds might take longer than what you\u2019d earlier accounted for. If you are not prepared for it, that could be fatal. Don\u2019t die mid-keystroke. Die trying. But above all, avoid dying at all.<\/li>\n<\/ol>\n

    \u201cIf you can just avoid dying, you get rich. That sounds like a joke, but it\u2019s actually a pretty good description of what happens in a typical startup.\u201d\u200a\u2014\u200aPaul Graham, Y Combinator<\/em><\/strong><\/p><\/blockquote>\n

    4. Know your burn, track your burn, control your burn. <\/strong>Question the expenses you\u2019re committed to. Just because you have okayed something in the past, doesn\u2019t mean you don\u2019t track it\u2019s ROI. The money you spend on networking events is a classic example of doubtful ROI. Constantly trim the fat.<\/p>\n<\/div>\n<\/div>\n<\/section>\n

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    Survival stories are boring. Who wants to hear about the company that didn\u2019t die? Only our client founders, their investors, and us.<\/p>\n

    Avoid being a #BurnRateZombie by tracking your burn rate. Make your story boring again.<\/p>\n

    The best time to talk is now! Call us today<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/section>\n

    \u00a0<\/strong><\/p>\n

    TAGS: <\/strong>Burn rate<\/a><\/span>Entrepreneurship<\/a><\/span>Start-ups<\/a><\/span>Start-ups Financial books<\/a> <\/div>\n
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    <\/a><\/div><\/div><\/div>","protected":false},"excerpt":{"rendered":"

    After speaking with hundreds of CEOs, I realized that burn rate isn\u2019t as Startup101 as I had thought. There are still a lot of things that founders understand incorrectly when it comes to being a #BurnRateZombie. But before we get into it\u2026 Let\u2019s take a pop quiz! Once upon a time, there was a CEO […]<\/p>\n","protected":false},"author":2,"featured_media":1543,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[14,3,11,5],"class_list":["post-1163","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-startups","tag-burn-rate","tag-entrepreneurship","tag-start-ups","tag-start-ups-financial-books"],"_links":{"self":[{"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/posts\/1163","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/comments?post=1163"}],"version-history":[{"count":3,"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/posts\/1163\/revisions"}],"predecessor-version":[{"id":1699,"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/posts\/1163\/revisions\/1699"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/media\/1543"}],"wp:attachment":[{"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/media?parent=1163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/categories?post=1163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mystartupcfo.com\/blog\/wp-json\/wp\/v2\/tags?post=1163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}