Controlling Your Startup Business “Burn Rate”
StartupNation.com - August 7, 2006 - Cash isn’t like calories. Those, you want to burn up fast. But when it comes to the cash consumed by your startup business, the slower your “burn rate,” the better.
Knowing the burn rate in your new business and managing it well will tell you – and indicate to your investors – when you’ll need more investment or loan, or when you’ll break even and begin to make a profit.
Even if you haven’t sold a dime’s worth of products or services yet, you might be able to obtain that capital cheaper than when you started up. “When the markets are good, there’s lots of money out there trying to find companies to put it into,” says Tony Grover, head of RPM Ventures, an entrepreneurial financier based in Ann Arbor, Mich. “Negotiate hard and get cheaper cash.”
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