What do 116 days left mean? It’s about four months, a little less.
What’s $786K? It’s a pretty nice house in Portland. It’s three Ferraris or two Rolls-Royces.
I recently looked at our bank account and made a simple calculation to figure out how many days we have left until we run out of funds assuming our current burn rate and that we do not make any profit in the coming months.
When I presented these numbers at our company-wide meeting on May 1st we had enough cash for 120 days, we are now at 116 days. Time is ticking.
It has been a little over a year since we decided to research our industry and a product that is superior to all competitors on the market. We have not earned a penny during this year. Why are we so sure that something is going to change in the next 114 days?
What changed for us in the last year? A lot. We researched and learned a ton about our market and target demographic. We also made tons of mistakes as we built the product. We hired an amazing team of people who can pretty much do anything you can imagine.
In the next 114 days, we must choose and implement one of the following options:
1. We focus on sales and break even i.e. our burn rate will be covered by our revenues.
2. We prove our business model and attract outside investment.
There is an option of total failure where we have to close the company down, but we are not evaluating this at the moment. We understand this may happen we just don’t see this as an acceptable outcome at the moment.
Option #1: We could break even in 3 months
I met with a business acquaintance not too long ago who is interested in our company; he asked me the following question:
How long would it take for you to break even (meaning your revenues cover your burn rate) if it were your #1 priority?
Without much deliberation I said it would take about three months. I’m pretty confident we can cover our burn rate with our revenues in 3 months. To get to break even point we need a lot of sales. We could, in theory, take our focus off everything we’re doing now with a product and just focus on sales.
Who has most money to spend on our product? The commercial sector of course. Office buildings, hotels, restaurants, cafes and many other commercial buildings.
We already have a lot of connections in the commercial sector which we could use right now. We could start today, contact all our connections and start selling wall art right away. We could break even and cover our burn rate with revenues in 3 months.
The question is: Will this be good for our business? I believe it won’t.
Why? Time is more valuable than money, everyone knows this. We are currently using our funds to perfect every detail of our product and business model as we buy time and risk everything we got. We are not dedicating any time to sales.
You might not see it yet but our industry in the middle of a huge transition. I believe this fact alone is enough to risk everything and not focus on sales at this time. We need to tune fine our product and business model instead of jumping head first into sales.
I have a team that believes in our vision and understands that we are risking our entire company by not focusing on sales at this time. The team also knows the risk we are taking is justified. They are ready to risk the company just like I am, and that is exactly why we have a chance to make it big.
So as you can see ‘focusing on sales and reaching a break even point in 3 months’ is not an option for us right now. Therefore, we are looking at option #2: taking outside investment.
Option #2 Take Outside Investment
In order to secure outside investment, we need to prove our business model. Our business model must be working well here in Portland, and we need to have a crystal clear plan of how we will move forward and expand.
We already have an expansion plan we created. We also have a business model that we exhaustively researched and thought through. I’ll soon write a post detailing the business model and how it works.
In an effort to make sure every team member knows how much time and money we have left to prove our business model and secure outside investment I decided to post a piece of paper at the entrance to our office with days and $$$ left. It looks like this:
Every day the employees at our company will see these numbers: How many days left and how much money we have left as a company and as each of us personally.
I truly believe this will help keep us accountable and help us work more efficiently. It will help all of us focus on what is vital for our business as a whole.
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