in Startups

Controlling Burn (Part 2)

I think helping failing startups is going to be a great business opportunity in the next 12-18 months. In fact, anybody want to do a startup about helping failing startups. All those overvalued frothy companies are in for an interesting surprise when they find out that their angel isn’t going to forever bridge them to nowhere.

So a few last tactics.  Part 1 is here.


There is often a fatally flawed line of reasoning , (its probably doubly fatal for subscription business models) that goes something like this “lower price, sales increase, more customers, life is better”.  Its flawed, but not because sales won’t go up, but because you get crappy customers who churn off 3-4 months later and bad mouth your product. And thats probably more expensive than not getting the customer in the first place.

Photo By Todd Shaffer

When you do price and offer testing, you need to include usage & churn analytics.  This sucks because you may not have useful data on churn for 3-6 months.  So figure out your key usage metrics and understand how they relate to churn.  Customers give all kinds of warning signs before they churn (such as they stop using the product).  Setup your price tests by cohorts that you can track usage data.

If anything, in a cash crunch, you want to raise price and have less better-quality (i.e. cheaper to serve) customers.  But not all businesses can raise price without significant relationship repair.  So an alternative is to figure out how to pull cash forward.  For instance give discounts if users prepay for a year.  Give discounts for closing fast to enterprise customers.  Change how you bundle your pricing.

Don’t Give Up

I think this is the number one piece of advise I can give.  Keep pushing forward.

I’d love to see stats on when and how founders & CEOs leave their startups. You hear horror stories about CEOs getting forced out, but from my anecdotal evidence of other startups, I’d wager that more CEOs leave than get forced out and they leave/give up right around this point. Or they get “acquired” in a great nobody benefits acquisition but the team can at least do something new.

You can’t give up. You have to survive. Smile & enjoy life, you are living to see another day.