If your revenue plan isn’t written in stone, your expense plan shouldn’t be either

One of the (many) benefits of being an early stage private company is that you don’t have to forecast your revenue and earnings to the public to judge 

It’s great because you can change it without having a massive impact on your company quarter to quarter. 

Often times when we see early stage startups predict revenue they almost always get it wrong. Even the best performing companies will get it wrong as it often takes longer and is harder to scale revenue that originally believed.  That’s why we don’t really obsess on revenue forecasts, particularly in an early stage, capital efficient company.

But while revenue plans aren’t written in stone in those early days, your expense forecast shouldnt be either. 

The timeline the company originally came up when raising that last round was likely something like the classic, “this will last 18 months”. That’s a perfectly fine approach as we don’t like to see a financing last the company less than that. 

But there is nothing about that expense plan that should be written in stone. I recommend working backwards and decide if you have enough time to make the progress you need. Revisit your assumptions Don’t take anything for granted. If you need more time then slow down the burn rate. This means either reducing that aggressive hiring plan you originally came up with, or you may need to reduce the team. Neither are exciting but not giving the company enough time can be much more painful. 

I’ve been through all of these scenarios, as an investor, board member and from working inside startups. Staying lean and mean is always better than being forced into fund raising.