November 2012

November 2012

It quite often happens that a company is (about to) run out of money. That can happen for lots of reasons; more costs have been made in order to get ready for market, more money is needed for using the momentum, change of business model, or even external factors can contribute to the fact that a company runs out of money. Basically there are two solutions: reduce your burn rate when you see things a threatening to slow down, or get more money in. I think it should be a combination of reducing costs and increase the amount of money coming in.

Both can be tricky. Let’s start with the burn rate. This is basically the amount of money you spend per month. A lot of these costs are fixed, but some of the variable ones give you an opportunity to reduce expenditure. On the “in” side of the equation you can either boost sales, or get additional funding. That latter one is by no means a guarantee. It all depends on the reason(s) why you are running out of money.

As an investor I would, when times get hard, like to see a combination of both; reduce your costs, increase your sales effort, and try to find alternative funding. As to that, your best bet is to keep it in the family…..

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