Budgeting, Projecting & Burn Rate

This section covers strategic planning as it relates to available funds and budget constraints. It also covers the important metric of Burn Rate, including best practices on setting a burn rate and calculating one.


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Budgeting, Projecting & Burn Rate

Fred Wilson 

The budgeting process is really critical in a large company. It forces the company to make highly informed decisions about investments and resource allocation and it creates company wide discipline around hitting goals. I have never seen a company of 150 employees or more operate functionally without a strong budget process.

 

 Chris Dixon

High growth, early-stage tech companies often have a choice about how to become exceptionally valuable businesses: they can focus on growing revenues at the expense of margins, or margins at the expense of revenues.

 

 Fred Wilson

 

You can build a product for less than $50k/month, particularly if you and your co-founders are deeply technical and if you have at least one founder who has great product and design skills.

 

Fred Wilson

 

A good rule of thumb is multiply the number of people on the team by $10k to get the monthly burn. That is not the number you pay an employee. That is the "fully burdended" cost of a person including rent and other related costs.

 

Chris Dixon

I was once told by an experienced entrepreneur (I can’t remember who) to always have at least 18 months of cash in the bank. The logic behind this is: 1) as a rule of thumb it takes 3 months to raise money, 2) building/marketing/selling technology always takes longer than you think.