Running your company with a short runway is extremely painful. A month or less is impossible, two months is crazy, three months causes loss of breath and with four months or longer available in the bank, maybe there’s a chance for you if revenue is on the upswing. A company’s runway can be calculated by dividing the money in the bank by the monthly spend. If you focus on sales, the resulting revenue adds to the money in the bank and your runway is automatically extended. You can sleep better at night knowing you don’t have to ask investors for more money until later, and maybe never, if you get enough sales going. Runway extension is automatic if you increase sales, reduce expenses, obtain additional investments or a combination of all three.
There are at least eight key components to extending your company’s runway.
1. Increase revenue. Seems easier said than done, which it is. It takes work to increase your sales revenue. One of the best ways to manage an increase in revenue is to increase the number of outbound contacts and being honest about the validity and size of the opportunities uncovered and in the pipeline. Qualify each one so time is not wasted on invalid prospects. More on this in a previous article titled: Get All the Pertinent Information Before Getting Off the Phone.
2. Improve the efficiency of your sales or sales process. This could involve many things, ask your Board of Advisors for guidance and feedback. To achieve sales efficiency, you could work to streamline the process using a form of automation, or you could work on providing better training, support, and encouragement to your sales team. At the end of the day, you can’t do this without your sales team - so give them what they need!
3. Increase and eventually streamline your social presence. Whether it’s LinkedIn, Instagram, Facebook, etc., curate posts which promote your product’s value. Eventually, you should have a schedule you follow as to when you should post your content and get others to join your efforts to achieve social media amplification.
4. Expand the customer base and bring variety to the product. Work towards determining and targeting new market segments and entering new geographic areas. Additionally, bring variety to the product. By diversifying the offering, this could help manage the runway by providing new sources of revenue. Whether it's introducing new products, services, or expanding into new markets - always make sure your company is keeping up with the latest market trends.
5. Focus on high-value customers. All customers are of the utmost importance, however, customers with a proven track record of loyalty to your product should be assured the best support and service. It would be in your company’s best interest to pay attention to what your loyal customers recommend in terms of developing an enhanced product that meets their specific needs.
6. Channels and partners will determine your sales results and associated expense. A company needs to decide the role which partners will play in their sales efforts. Additionally, determine through what other channels you will be distributing your product. Create a balanced, non-competitive, sales outreach and support all channels fairly.
7. Reduce expenses. Accelerators, vendors offering free services, or lower-priced access to their services can provide you with many months of runway. Many companies will provide lower costs for their services as an inducement for your growing company to be hosted by them so that in the long run you are locked in on their platform. Payroll expenses can be reduced by offering some compensation in the form of stock options or other future equity. This future equity can be tied to performance and employment continuity which in itself is a great tactic for reducing overall expenses while simultaneously boosting moral.
8. Obtaining additional investments. This can be done by obtaining grants from the local government, for example. Next, the idea is to create a stream of investor newsletters which sets goals from one outreach to another and in the consecutive investment newsletters announce achievements and new goals. Send this update every 60 to 90 days in order to motivate investors to continue investing.
If you’d like to brainstorm about how to increase your runway, reach out!