Zoom Had a Burn Rate Budget. So Should You.

  • First, Build a Burn Plan. Take your burn rate for the last 4 months, and average it. Then roll it forward and see how many months it will last. Then see how much increasing the burn by X% decreases your runway. Solve for the amount of burn per month equal to the runway you think you need. And ideally, add a buffer of say 3–4 months of runway.
  • Then, Set a Burn Rate Budget for Each and Every Month With The Team — And Review It Weekly. If the burn budget is say $200k for this month, make sure everyone knows how you are tracking weekly. This will produce magic. Instead of everyone naturally acting a bit selfish to protect their asks — they’ll act like a team. They’ll automatically prioritize when and how to make hires, expenses, etc. to fit the budget for each month. Sales will know that one hire can wait. Marketing will put off a campaign that probably won’t perform as well at least for a month or two. Engineering will wait until next quarter to make that hire, if they don’t really need her right now. Etc. etc.
  • As Revenue Goes Up, You Can Burn More Each Month. At least a little. So relief does come. The burn rate budget just forces everyone on the team, as a team, to sequence exactly when during the year various expenses will be incurred.

--

--

--

SaaStr. Pre-nicorn VC. Co-Founder CEO of EchoSign. Served as VP, Web Biz Svcs at Adobe. Also built nanobatteries implanted inside your body.

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

What Business Should you Start in 2022

The Most Rampant Reason for Tech Startup Failure

Supportful.com is closing

Getting your place at the table

Announcing iSeed II

Why you should consider Medium as a Blogging Platform for your start-up?

Faster Isn’t Always Better

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Jason M. Lemkin

Jason M. Lemkin

SaaStr. Pre-nicorn VC. Co-Founder CEO of EchoSign. Served as VP, Web Biz Svcs at Adobe. Also built nanobatteries implanted inside your body.

More from Medium

Selling a dead startup

A VC Told Me Why My Fundraising Pitch Sucked — Are You Making the Same Mistake?

I looked at 105 SaaS pricing pages. Here’s what I learned.

Why building a “compound startup” might be the next, great, non-obvious SaaS play