How To
What is a Burn Rate and Why Should Startups Care?
For early-stage startups, having cash is essential to staying afloat. But it’s one thing to have money and another to know how to spend and manage it. According to CB insights, 29% of startups fail because they run out of cash. That’s where the importance of cash burn comes in.
Understanding the burn rate of your startup and learning how to manage and monitor your cash runway is an essential element for survival and growth in the business world. Here’s why startups should pay special attention to their burn rate.
Burn Rate Measures Startup Longevity
A burn rate is essentially the rate in which a startup or company uses its cash, and indicates how a company is spending its funding to finance overheads before generating revenues from its operations.
Think of cash burn like the hourglass that measures how long your company has before it runs out of money. So, unless you want to risk spending too much too fast, you’ll want to pay attention to that cash flow.
To calculate your burn rate for a specific time, deduct your current cash balance from your starting cash balance. If your company, for example, started with $1M in the bank and spends $100k a month, its burn rate would be $100k.
[Burn Rate = Starting Cash Balance – Cash Balance in Current Month/in a specific period]
Cash Burn Rate
Cash runway is the metric that determines how long your cash will last at your current burn rate – basically how long your company has before it runs out of money if the burn rate remains constant. Your cash runway is your cash reserves divided by your monthly burn rate.
[Cash Runway = Starting Cash Balance / Burn Rate]
Going back to the previous example, if you have $1M in your cash reserves, and your burn rate is $100k per month, you will run out of cash in 10 months ($1M divided by $100k).
Cash runway is a significant concern for venture-backed startups who are using the cash to build the business, as they either need to become cash flow-positive or close another funding round before they run out of money.
The cash runway metric is also being used to measure how fast mature businesses are growing their cash reserves or whether they are investing that money to fund more rapid growth.
Why is Cash Burn important:
It helps you anchor startup expenses.
Cash burn affects a company’s financial runway and the amount of money it has in the bank. Startups can manage their burn rate by monitoring their cash flow, the metric that shows how much money you’re making versus how much money you’re spending. When monitoring your cash flow, you should identify where to reduce expenses and operating costs to prolong your financial runway.
Affects investors’ decisions
Burn rate identifies a company’s likelihood to enter financial distress. Your burn rate performance can affect your next investment round in many ways. It could prompt investors to either inject more capital into a company so that it starts generating revenues, or set specific deadlines for startups to make revenues. If you spend aggressively, you risk running out of money and losing your cash reserves before you make enough progress in raising another investment round.
Not all high burn is bad.
A high burn rate is not always a red flag. For fast-growing startups, a strategic burn rate that aims at gaining market share, winning customers and generating higher profits is essential for growth and attracting investors than a lower burn rate.
When cash burn is alarming.
Let’s take a look at Buenos Dias – a fictional startup as an example. Buenos Dias started with a net cash balance of $10 million in its first year in business. In the first half, the startup spent large amounts on operating activities, office spaces, corporate travels and salaries.
At the end of the first half, Buenos Dias’ cash balance was $7 million, meaning that the net cash burned by the startup amounted to $3 million – a burn rate of roughly $500,000 per month.
Assuming Buenos Dias has no other cash reserves, and its monthly burn rate remains constant, the startup’s runway is 14 months. Buenos Dias will have to take measures to reduce their burn rate, find additional sources of funding, or worst-case scenario cut their losses and seize operations.
How to reduce the cash burn rate?
There are many measures startups can take to reduce their burn rate and avoid running out of cash. Companies can work on increasing their revenues, getting more prospects into their funnel, generating more sales and raising their pricing. Other measures can include reducing operation costs, containing monthly expenses, reducing salaries, deferring new hires and cutting all costs that aren’t contributing to their success.
Businesses go to great lengths every day to control their expenditures and increase their revenues. Understanding how cash burn rate works, analyzing unit economics and cost of growth can help companies make informed decisions about the money they need to raise to cover their burn rate and achieve their goals. Learning to be strategic about how you’re spending your money ensures your success and sustainable growth.
Startups’ founders need Tribal’s spend management dashboard to help them spend wisely, set spending limits and monitor how every dollar is spent so that they are always in control of their expenses.
A URL Shortener is a technique in which a URL may be made shorter and still redirect to the original long page.
Most URL Shorteners are free and easy to use but come with limitations.
Google shut down its Google URL Shortener in 2018 with continued support until March 30, 2019. However, all existing links will continue to redirect to the intended destination.
Top URL Shortener Services on the Internet
1. Bitly.com
Bitly offers a free and enterprise version of its URL shortening service. No signup necessary, but creating an account allows you to manage links quickly and change the short link characters if you wish.
According to this Quora answer, the enterprise version of Bitly costs around $995/month.
Pro Tip: add + after the short link to access analytics of any bitly link. bitly.com/link+
2. TinyURL
A simple shortener that requires no sign-up and allows users to customize the keyword. The service is free to use, but there is no analytics.
3. Short.io
The best shorten link provider so far, it has so many useful features such as google analytics integration, bulk import, broken links detection, built-in analytics with so many details, link cloaking, and more.
Cost: affordable compared to similar solutions.
4. Rebrandly
Rebrandly is one of the popular URL shortener services in the market. It’s the most complete and reliable link management platform. Their solution provides the easiest way to create, measure, and manage short URLs with a custom domain name.
You can buy your domain name using Rebrandly, tag your URLs using UTM tagging, allow social media pixels to optimize for conversions, and more.
It’s expensive compared to other solutions.
5. eg.gd
eg.gd is a new URL shortener service that offers the same as rebrandly but for free. It was launched last year when bit.ly service was blocked in Egypt.
In the course of my professional endeavors, I consistently inquire about the origins of information, the methods by which our audience discovers us, and the roots of potential leads. These inquiries, among others, are integral to unraveling the complexities of the marketing funnel.
A commonplace challenge encountered by numerous marketers on a daily basis revolves around a pivotal question: which blog post proves most effective in generating leads and conversions?
If you have a blog on Webflow that includes a lead gen form or a newsletter form in all blog posts, when you receive an email from one of the forms – of course, you have to find out the URL of the respective page. This way, you can detect the top converting posts.
I’ve been searching for a solution here and there and finally found it. So, I thought to share it here.
How to automatically include the current URL in the webflow form?
- Add an embed code before the submit button of your lead generation form or any other form type – make it hidden, and insert the following code into it then save.
- The javascript code you need to make this work:
<script type="text/javascript"> window.onload=function()
{document.getElementById('pageurl').value = window.location.href;} </script>
<input type="hidden" id="pageurl" name="pageurl" value="pageurl" />
3. Once published, any new form submission will have a new column called “pageurl” so you can detect the source page of this submission.
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In the ever-evolving world of digital marketing, staying ahead of the curve is paramount. One essential factor that often flies under the radar is Google’s E-A-T principle, which stands for Expertise, Authoritativeness, and Trustworthiness. This principle, now upgraded to E-E-A-T to include Experience, plays a pivotal role in enhancing website credibility and user experience.
In this article, we’ll delve into how understanding and implementing E-E-A-T can significantly influence your search engine rankings.
Unearthing the Essence of Google E-E-A-T
E-E-A-T is an acronym that encapsulates the qualities Google values when assessing the quality of online content. While it might not be explicitly mentioned in Google’s 200 known ranking factors, it holds undeniable significance in the eyes of quality raters and SEO professionals alike.
Expertise: Mastering Your Domain
Expertise is the cornerstone of E-E-A-T. It revolves around showcasing your in-depth knowledge and proficiency in your niche. To demonstrate your expertise effectively, consider these strategies:
1. Comprehensive Subject Mastery: Your content should reflect a deep understanding of your subject matter, leaving no room for ambiguity.
2. Credentials and Qualifications: Display relevant qualifications and credentials to bolster your credibility.
3. Proven Track Record: Highlight your past accomplishments and successes, as they can instill trust in your audience.
4. Research and Data: Stay updated with the latest research and trends in your field and back your content with accurate data.
5. Niche Specialization: Focus on a specific niche to establish yourself as an expert in that area.
6. Active Contribution: Contribute to your field by publishing content, and research papers, speaking at relevant events, or joining professional organizations.
Experience: Real-World Application Matters
Experience complements expertise by emphasizing practical, real-world application. To convey your experience effectively, consider these tactics:
1. Practical Application: Apply your knowledge in real-world scenarios and showcase your problem-solving skills.
2. Case Studies: Present real-world examples and results to illustrate your expertise in action.
3. Success Stories: Share stories of achievements or satisfied clients to instill confidence in your abilities.
4. Portfolio Display: For creative fields, such as design, art, or writing, showcase your previous work to demonstrate your experience.
5. Knowledge Demonstration: Stay updated with industry best practices, trends, and new developments, and share your insights through blog posts, articles, or speaking engagements.
6. Customer Testimonials: Positive testimonials from satisfied customers provide social proof of your expertise.
Authoritativeness: Building a Trustworthy Reputation
Authoritativeness centers on establishing your website as a reliable source of information within your niche. To enhance your authoritativeness, consider the following strategies:
1. Backlinks and Citations: Earn backlinks from authoritative websites in your industry, a strong signal of your website’s trustworthiness.
2. Awards and Recognition: Credible recognition, such as awards and certifications, contributes to your reputation.
3. Thought Leadership: Demonstrate authority through original research or innovative ideas, and engage in industry discussions.
4. Collaboration with Experts: Collaborate with recognized experts in your field through co-authored articles or speaking engagements.
5. Strong Social Media Presence: Engage with your audience on social media platforms to establish yourself as an authoritative figure.
6. Consistent, Relevant Content: Create high-quality content consistently to build credibility with users and search engines.
Trustworthiness: The Bedrock of Credibility
Trustworthiness is the final piece of the E-E-A-T puzzle, focusing on the credibility of your website’s information. To foster trustworthiness, adhere to these guidelines:
1. Transparency: Be transparent about your brand, contact details, business operations, and the purpose of your content.
2. Provide Accurate Information: Ensure your content is factually correct and up-to-date, and avoid misleading practices.
3. Ethical Practices: Follow ethical guidelines, respect user privacy, handle sensitive data responsibly, and comply with relevant laws.
4. User Experience and Security: Create a positive user experience and prioritize website security with HTTPS connections.
5. Customer Testimonials and Reviews: Genuine testimonials from satisfied customers bolster your website’s trustworthiness.
6. Customer Support: Offer prompt and helpful customer support to engage with your audience effectively.
7. Disclosure of Affiliations: Clearly disclose any affiliations or sponsorships that might impact your content.
While Google’s Quality Rater Guidelines may not explicitly mention E-E-A-T, adhering to these principles can significantly improve your website’s credibility and user experience. Remember, achieving higher SERP rankings requires a holistic approach, and understanding and implementing E-E-A-T is a valuable piece of the puzzle.
If you need expert guidance, consider enlisting the support of professional SEO services to help you navigate this ever-changing landscape.
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