There has been a lot of discussion and concern lately over the increasing negative cash flows (i.e., burn rates) by startups. Joe Floyd (a VC at Emergence Capital) recently wrote in TechCrunch an excellent article with a clever, diagnostic tool to help entrepreneurs to quickly gauge if their burn rate is too high.
There are five key questions that this Floyd uses that reference crucial KPIs and metrics that all startups should be monitoring and planning around. A good CFO who is a true business partner to a Founder or CEO is crucial in aggregating and analyzing this relevant data. This is critical in helping the company grow and scale efficiently by identifying areas of improvement in its business model
Here are the five key questions yourself if you are an entrepreneur running a startup:
1. Market Dynamics: Does your market have network effects?
2. Competitive Intensity: Who are your major competitors?
3. Customer Retention: What is our churn?
4. Sales and Marketing Efficiency: What is the return on every dollar of sales and marketing spend?
5. Fundraising Capability: Who is in your investor syndicate and how easily can you add new sources of capital if you need to fundraise quickly?
Read the full post here: