Wednesday, May 17, 2006

Cash Breakeven Analysis

In the spirit of sharing best practices in start-up management, I write to share some interesting analysis on cash breakeven forecasting that I saw at a recent BOD meeting. The BOD deck included a simple yet powerful slide that helps understand the size of the "cash gap" derived from analyzing the make-up of monthly cash expenses, current monthly recurring cash revenue base, and average monthly sales price. Simply graph total montly cash expenses by category vs existing recurring monthly revenue - illustrate the size of the gap and note how many incremental sales * contribution margin it will take to close the gap.

An example is below:

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