Startup Survival Kit
8 concepts · ~22 min · Beginner
The essential concepts that determine if you run out of cash. Master cash flow, burn rate, break-even, and the unit economics of survival.
What You'll Learn
- ✓Calculate your runway and know exactly when you run out of cash
- ✓Distinguish between revenue and cash flow — and why cash kills companies faster than losses
- ✓Find your break-even point and track whether you're approaching it or it's running away
- ✓Identify whether your churn rate is killing your growth before revenue can compound
- ✓Measure customer retention rate by cohort and spot early warning signs
Burn Rate
Finance
💡 The Concept
Burn rate is the speed at which your company spends cash reserves before generating positive cash flow. Gross burn is total monthly spending; net burn is spending minus revenue. A startup with $50K/month expenses and $20K/month revenue has a $30K net burn rate and needs $30K from savings every month to survive. VCs use burn rate to calculate runway and assess financial discipline — a startup burning $200K/month with $10K MRR will be scrutinized much harder than one burning $200K with $150K MRR.
⚠️ The Trap
The trap is tracking burn rate from your P&L instead of your bank account. Accrual accounting can show $50K net burn while your bank is actually losing $80K/month because of delayed client payments (accounts receivable), prepaid annual subscriptions expiring, and vendor invoices coming due simultaneously. Many founders have been shocked to discover their 'calculated' 12-month runway was actually 6 months when measured by actual cash in the bank.
🎯 The Action
Calculate both metrics and track them separately: Gross Burn = Total Cash Out per Month. Net Burn = Cash Out − Cash In. Then compute Runway = Cash Balance ÷ Net Burn. Set alerts: if runway drops below 6 months, initiate cost cuts or fundraising immediately. Review burn rate weekly (not monthly) — cash surprises kill more startups than bad products.
Scenario Challenge
Your SaaS has $180K in the bank. Monthly expenses are $35K. Revenue is $15K. Your co-founder wants to hire two more engineers at $8K each.