5 reports every early startup must generate to stay alive
Here are some of the reports you need to be generating if you’re running a startup
Here are some of the reports you need to be generating if you’re running a startup. PHOTO: AFP
What do you know about your startup? No, not your team, not your product, and not your competition. What do you really know about the health of the business?
You have information? Sure, but what kind? The problem with information these days is the sheer amount of it. At this point, measuring the wrong metrics will prove to be more hazardous to business health than not measuring any at all.
However, it appears that not all information is made equal, and early-stage startups stand to lose the most from being ignorant of this fact.
Vanity metrics (aka feel good metrics) is a problem. They paint a superficial picture, which typically focuses on potentials vs. actuals. While optimism is commendable, it’s important to understand that no amount of potential pays the bills today.
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Here are some of the reports you need to be generating if you’re running a startup.
Burn rate
Burn rate is not so much a report as a warning of impending doom. In its most basic form, the burn rate shows your operational costs on a weekly or monthly basis. It typically accounts for variances but reliably identifies all recurring payables like salary, rent, and utilities.
The burn rate is a critical (if not the most critical) metric that a startup should be measuring for one simple reason: It doesn’t take Einstein to deduce how long your business can run on current cash in hand without additional inflows.
Work in progress
WIP reports are essential in the service sector. Simply put, the WIP draws up your project pipeline and completion dates. This sums up how much revenue you stand to gain at the end of the credit term, which helps in planning capital expenditures and operational expansions if any.
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In my line of business, WIP is reviewed on a weekly basis. The popular Monday morning meetings are largely scheduled to pour over this. Moreover, WIP reports indicate whether or not you’re safe as far as cash flow goes and helps ease the oncoming terror of the burn rate deadline.
Cashflow
Cash flow statements are pretty standard. Every business generates some form of a payable versus receivable report. This helps figure out which suppliers to avoid (joke) and which customers to pester (no joke). This report also helps you understand the health and cash balance of your business.
In the case of a startup, where the accountability for collections is possibly unallocated, the receivables also prompt collection for follow ups. Finally, payables help the business make payments and prepare cash in time.
Marketing Funnel
The marketing funnel is a moderately advanced report to generate, especially for early-stage startups, because some level of data capturing is required. However, it’s not necessarily rocket science and isn’t resource-intensive.
To start, it might be advisable to devise a funnel model that is most suited for the business based on customer touch-points. From there, the touch-points can be increased or the mode of capturing data can be changed.
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Regardless of how it’s done, the idea is to understand where marketing resources should be focused on to make improvements. If done correctly, the funnel can even act as a predictive tool preceding customer entrance to the WIP pipeline.
Revenue and margin
The revenue and margin statement is more popularly included in the profit and loss (PnL) statement. For early-stage startups, the reason for focusing on revenue and margin instead of the standard PnL is because their breakeven point might be further along.
There is no reason to get gloomy with a negative PnL when it’s understood that profitability is not the order of the day.
Instead, focus on improving margins. The margin maintained as a percentage of revenue is a key area. Controlling costs and pricing intelligently to achieve profit maximization is the critical success metric for startups and should be measured that way.
This article originally appeared on Tech in Asia.
You have information? Sure, but what kind? The problem with information these days is the sheer amount of it. At this point, measuring the wrong metrics will prove to be more hazardous to business health than not measuring any at all.
However, it appears that not all information is made equal, and early-stage startups stand to lose the most from being ignorant of this fact.
Vanity metrics (aka feel good metrics) is a problem. They paint a superficial picture, which typically focuses on potentials vs. actuals. While optimism is commendable, it’s important to understand that no amount of potential pays the bills today.
Why the Arab world could be the next startup hub
Here are some of the reports you need to be generating if you’re running a startup.
Burn rate
Burn rate is not so much a report as a warning of impending doom. In its most basic form, the burn rate shows your operational costs on a weekly or monthly basis. It typically accounts for variances but reliably identifies all recurring payables like salary, rent, and utilities.
The burn rate is a critical (if not the most critical) metric that a startup should be measuring for one simple reason: It doesn’t take Einstein to deduce how long your business can run on current cash in hand without additional inflows.
Work in progress
WIP reports are essential in the service sector. Simply put, the WIP draws up your project pipeline and completion dates. This sums up how much revenue you stand to gain at the end of the credit term, which helps in planning capital expenditures and operational expansions if any.
Centuries-old barter system revived with this Pakistani startup
In my line of business, WIP is reviewed on a weekly basis. The popular Monday morning meetings are largely scheduled to pour over this. Moreover, WIP reports indicate whether or not you’re safe as far as cash flow goes and helps ease the oncoming terror of the burn rate deadline.
Cashflow
Cash flow statements are pretty standard. Every business generates some form of a payable versus receivable report. This helps figure out which suppliers to avoid (joke) and which customers to pester (no joke). This report also helps you understand the health and cash balance of your business.
In the case of a startup, where the accountability for collections is possibly unallocated, the receivables also prompt collection for follow ups. Finally, payables help the business make payments and prepare cash in time.
Marketing Funnel
The marketing funnel is a moderately advanced report to generate, especially for early-stage startups, because some level of data capturing is required. However, it’s not necessarily rocket science and isn’t resource-intensive.
To start, it might be advisable to devise a funnel model that is most suited for the business based on customer touch-points. From there, the touch-points can be increased or the mode of capturing data can be changed.
This startup wants to make building websites as simple as chatting
Regardless of how it’s done, the idea is to understand where marketing resources should be focused on to make improvements. If done correctly, the funnel can even act as a predictive tool preceding customer entrance to the WIP pipeline.
Revenue and margin
The revenue and margin statement is more popularly included in the profit and loss (PnL) statement. For early-stage startups, the reason for focusing on revenue and margin instead of the standard PnL is because their breakeven point might be further along.
There is no reason to get gloomy with a negative PnL when it’s understood that profitability is not the order of the day.
Instead, focus on improving margins. The margin maintained as a percentage of revenue is a key area. Controlling costs and pricing intelligently to achieve profit maximization is the critical success metric for startups and should be measured that way.
This article originally appeared on Tech in Asia.