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.

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Jason M. Lemkin

Jason M. Lemkin

15.9K Followers

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