Hotline: 1800 102 2007
Search Business Opportunities

Controlling Your Business Burn Rate

Monitor your company’s health by checking its burn rate!

Do you suffer from the running-out-of-cash syndrome before you reach those milestones and find yourself burnt out of business? Don’t worry! The solution to this is in calculating your business ‘burn rate,’ which will indicate when you’ll need more investment or a loan, or when you will break even and begin to make profits. When it comes to the cash consumed by your startup business, the slower your burn rate the better it is.

Calculating your burn rate

Your burn rate refers to how much capital you go through each month. When you start up, you begin with a specific amount of capital which you divide by your monthly expenses so as to know how long can you sustain with no revenues projected during the first year. However, in this calculation, you’d be in trouble if you don’t start making money by the end of the last month. Rahul Jain, CEO, Business Coaching India says, “Controlling your burn rate can give you the confidence and resources to ramp up your startup business the way you want. Squeezing expenses in that new business is the best way to do it.”

Regular monitoring

The key to understanding your company’s health is to monitor its burn rate. If you already have revenue, this can help you to keep an eye on your order book and your cash-flow statement. By this you’ve got your finger on the whole working-capital system of your company and thereby, your burn rate. According to Mr. Krishna Tanuku, ED, WCED, ISB, “It is very important for you to review your burn rate every month, just as you do the components of the burn-rate equation: expenses and income.”

Check on business expenses

Obviously, one of your burn rate’s two components is easier to control than the other. You can’t unilaterally produce revenues for your company, but you can single-handedly control expenses. You should be ruthless about it, particularly in the early going so, monitor expenses every day is a must.

Beware of big commitments

You should keep major outlays and significant new financial commitments to a minimum, especially while you have to aggressively manage your burn rate. Once you decide to incur a big expense, take another day to think about it first. At least make sure you’re placing the right bets like adding sales people before a financial manager or buying the right inventory you know customers will readily go for. Kiran Nandkarni, CEO, Kaati Zone says, “One needs to spend your precious cash on what’s critical to producing revenue for your startup business.”

Generate capital

If you’re doing everything possible to contain expenses, but adequate revenue remains just over the horizon for now, you may simply have to add fuel to the fire and get more capital for your startup. While raising money by parsing out equity is one thing, entrepreneurs warn against taking out more loans or adding other debts.

Related opportunities
  • About:M Bar & Kitchen is something of a landmark in..
    Locations looking for expansion West Bengal
    Establishment year 2014
    Franchising Launch Date 2016
    Investment size Rs. 2 Cr. - 5 Cr
    Space required 2500 - 3000 Sq.ft
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater Kolkata West Bengal
  • Innov8 is a lifestyle collaborative workspace brand, where you work..
    Locations looking for expansion New Delhi
    Establishment year 2000
    Franchising Launch Date 2015
    Investment size Rs. 2 Cr. - 5 Cr
    Space required -NA-
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater South Delhi New Delhi
  • About Bike Studio by LA SovereignLA Sovereign Bicycles Pvt Ltd...
    Locations looking for expansion New Delhi
    Establishment year 2006
    Franchising Launch Date 2015
    Investment size Rs. 20lac - 30lac
    Space required NA
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater New Delhi New Delhi
  • Fine Dine Restaurants
    About:The "Just" in our Name "Just Falafel" has always stood..
    Locations looking for expansion Maharashtra
    Establishment year 2016
    Franchising Launch Date 2017
    Investment size Rs. 30lac - 50lac
    Space required -NA-
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater Mumbai City Maharashtra
Insta-Subscribe to
The Franchising World
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities