As a founder, it’s easy to say, “Of course, we’ll pivot!” But actually pulling a pivot off is no easy feat. How do you set yourself up for success in this new world? Which levers should you pull first? How do you ensure you can secure capital when needed or that your company is undeniably fundable?
Right now, becoming undeniably fundable should be every founder’s north star. It denotes that you’ve built an efficient company that will without a doubt garner venture capital attention and funding when the time is right.
Surface and scrutinize efficiency KPIs
As you begin the road to becoming undeniably fundable, you must prioritize KPIs that represent efficiency. Vanity metrics have taken the backseat in this new world, and there will be few paths forward for you if you don’t prove you’re efficient.
There are five key efficiency metrics that matter:
In this new chapter, CEOs must think like a CFO.
- Growth rate: The pace at which your annual recurring revenue (ARR) is scaling. Can you still grow 2x or 3x year over year right now? How does your product need to change?
- Customer acquisition cost (CAC): The amount of money you need to spend on sales and marketing to acquire one customer.
- CAC payback period: The time it takes to recoup the cost of acquiring a customer. Shoot for a time span that’s less than 20 months.
- Gross margins: The cost of servicing customers with both your technology and your people. The industry standard is about 75%.
- Burn multiple: The amount you are spending to generate incremental ARR. 1x is amazing but less than that is even better. Popularized by David Sacks, this metric has been a guiding light for my current company, as this metric doesn’t lie. You can’t hide spending or stash costs in other departments. It exposes the cold hard truth about your spending, growth and cash collection.
Examine your business and change your priorities
Once you have a strong grasp on your efficiency metrics, it’s time to take action. Regardless of your segment, industry or customer type, I believe you need to do the following.
Scrutinize your budget and shrink it to essentials
As a founder, you must dive deep into every department’s budget — don’t leave it to others. There’s no room for fluff.
Take stock of personnel costs
This article was originally published on TechCrunch.com. Read More on their website.