Determining Whether We’re Going Out of Business Anytime Soon

Each month I spend time analyzing our long-term projections document. It’s a hybrid of our (fiscal) year-to-date spending mashed up with our budgeted spending combined with our future-year projections.

startup runway The purpose and goal of this exercise is to determine our runway: How much money do we have in the bank and how long do we think it will last?

Knowing how many months of cash you have to operate the business is one of the more important questions to answer as someone running a business. Of course, this assumes everything goes to plan.

While projections are always based on assumptions, Edthena is a startup, and as a startup we’re operating on assumptions informed to some extent by outside information and indicators.

This outside information helps fill the gaps in information that we have as a young company. More ideally, we’d be able to build projections using past performance as a predictor of (repeatable) future success.

We think we know enough to project what will happen if we sell to plan and then hire accordingly, but ultimately we’re unsure. If we were certain, I don’t think we’d be calling ourselves a startup.

The good news is that everything is unlikely to go as planned. The plan, of course, being defined as how we see the future with information on hand today.

While we wouldn’t bet the company’s stability on it, we absolutely anticipate that something unplanned will happen and materially change the business (for the better).

This unplannable event would change how much cash we have on hand. It would extend the metaphorical runway. It would increase the odds that we’ll successfully take off before falling off the cliff.

Notice I didn’t say rocketship. Sure, that would be nice, but rocketships don’t take off from a runway.

Airplanes take off from runways. They travel quickly and great distances. I’m ok being an airplane that can take off successfully and then fly far.

Oh, I almost forgot, the highly-likely-to-be-wrong projection document indicates that we’ve got plenty of runway with plenty of room for error.

original photo credit: Frank Kehren via photopin cc

9 thoughts on “Determining Whether We’re Going Out of Business Anytime Soon

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