Why BurnRate Doesn’t “Do Financials”

Robert McLaws
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Yeah, we understand that our company name might be confusing to some people. They think we can calculate their burn rate and forecast their financials, whether they’re in launch, start-up or scale-up mode.

The reality is that you need to know how to do capacity planning before you can even begin to calculate your burn rate.

Burn rate forecasting is not a financial function. At its core it’s a people and timing function. It’s an exercise that involves everyone on your team— Your CEO, your CFO, your sales and marketing leaders, and even human resources staff and consultants.

Your goal should be getting the capacity planning process right by battle testing and validating it. Then, and only then, can you add money to the mix.

The key to burning at the right rate (rather than going down in flames) starts with humans and capacity planning, not with a spreadsheet.

Get the Process Right

Most companies think they have the right forecasting process. They rely on spreadsheets and input from their senior leaders to calculate cash flow and detailed expenses. They commit to their board and investors that they’ll be spending investment dollars wisely. But that’s not REALLY a process. That’s a bunch of numbers (with multiple iterations) and opinions.

The right process involves really diving into a full-blown capacity plan.

Sounds scary or time-consuming? It really isn’t.

We view BurnRate as the future of revenue operations because we’ve created an easy-to-manage, yet finely detailed deep way to plan for and adjust the human aspects and interdependencies that ultimately generate revenue.

Let’s say you’ve created your product or service. Next, you need to figure out how it will be sold, who will sell it, and what types of marketing programs need to fuel those sales efforts. That part of the process involves PEOPLE. Not just random people… the right people at the right levels with the right salaries.

For example, you may have three superstars currently selling your SaaS product, but you’ve secured some funding and have promised your board a big increase in sales and closed deals.

“So, we’ll just add more sales reps,” you might think. Keep in mind that finding the best people with the perfect (or close-to-perfect) skill set and results takes TIME. In fact, we believe that most people, even if they are sales stars, take 90 days to hit their stride.

You’ll achieve the results you and your board are looking for, but it may be three months later than you originally projected, and in the interim, you’ve carried the salaries and other overhead of new team members without being able to post sales (or enough sales against those expenses).

Battle Testing and Validating

What does that really mean? That new VP of Sales seemed like a hot shot in the interview process and your team loved them. They bring in a diverse and inclusive group team of talented BDRs, SDRs, and AEs.

Your marketing team presents what seems to be a killer lead-gen plan and has mapped out the customer journey. Marketing reviews the plan with sales and everyone is on board. The creative team starts churning out content and the martech stack is locked and loaded to feed leads to sales.

Your HR director and CFO are thrilled that the boxes have been checked and that you have a solid plan (including a cash flow projection). Everyone fist-bumps and/or high-fives.

But a few things can happen:

  • Seasonality and decision-making processes can slow down deals closing.
  • Those marketing campaigns aren’t generating the number of leads you projected.
  • The candidate pool is not as deep as you imagined and hiring/training is taking longer than anticipated.
  • Some of those new hires are taking time to learn your product. Others may decide they really don’t like your company (or you) and move on to other gigs. Personal issues can impact the number of hours sales professionals can work.

All of a sudden, those tidy spreadsheets that your team has worked so hard on go out the metaphorical window. You may have to spend hours, if not days, back at square one.

In the interim, you’re burning tons of cash.

So, How Do You Avoid the Burn?

Focus first on the people side of your business. Be honest with yourself (and your board and investors) about contingency planning.

Engage your team in the planning process and have tough “what if?” conversations.

Most important, invest in the automated tools that will take into account some of those human elements that can have a huge impact on your bottom line.

Having launched and scaled companies ourselves, we know that the best laid plans for cash flow and the coolest spreadsheet that illustrates your burn rate are useless if you haven’t put the time and brain power into talent and the timing behind finding and training the people who will deliver results.

We have redefined the concept of burn rate. It’s not just the amount of money you’re spending and when/how you’re doing it. Rather, your burn rate is the entire end-to-end process and tools you use to map out the future of your company.

Because after all, humans buy and sell your products and services. Our technology simply helps you make and adjust for those human factors, quickly and efficiently, which in turn, results in more sales and happier team members. Oh yeah, and your board and investors will have more confidence in your projections because you’re showing them much more than another spreadsheet.

BurnRate may not “do” financials, but we can take your business to a whole new level.

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