A startup’s annual financial plan should include the following six deliverables:
The CFO is at the helm of a company’s finance department, providing strategic financial oversight to the entire organization. Key responsibilities of a startup CFO include strategic planning, cash runway management, financial modeling, revenue modeling, budgeting, fundraising support, board support, and support through expansions, pivots, and M&A deals. The CFO also manages the finance team, including accountants, controllers, tax professionals, and FP&A professionals.
A startup’s financial model is a plan that helps founders and investors evaluate the company’s potential financial success. It provides information on the startup’s revenue, expenses, and investments, along with the associated risks and upside potential.
A startup’s burn rate is the rate at which the company is spending its available cash resources. Burn rate is calculated by adding together the total operating expenses incurred over a certain period of time, usually a month.
Reaching breakeven means a startup is generating enough revenue to cover its expenses; it is no longer operating at a loss. When a startup reaches breakeven, it can focus on growth, reinvest earnings into the company, and explore new opportunities.
Customer Acquisition Cost (CAC) payback period refers to the number of months it takes your startup to earn back its investment in acquiring a new customer. In other words, it’s the average time it takes for the net revenue from a customer to equal the cost spent on acquiring them. For example, if a SaaS startup spends $1,000 on marketing to acquire a new customer and earns $100 per month from the customer, the payback period would be 10 months.
There are several ways your startup can mitigate banking risks and protect its working capital. These include purchasing deposit insurance over and above the $250K FDIC insurance, maintaining deposits with “too big to fail” banks, and diversifying working capital across multiple banks. Burkland recommends startups adopt a treasury management policy that is approved by the management team and board of directors.
Yes, we advise that all venture-funded startups adopt a treasury management policy. This policy outlines the company’s risk management strategies, investment guidelines, liquidity policies, and other financial management practices.
A KPI (Key Performance Indicator) is a measure of the progress of a startup toward its business goals. Examples of the most important KPIs for startups to track include customer acquisition rate, customer lifetime value, gross margin, monthly recurring revenue, user churn rate, and cost of customer acquisition.
FP&A stands for Financial Planning & Analysis. Startups use FP&A to gain insights into their current financial situation, identify risks and opportunities, and develop strategies to maximize their financial performance.