Search US website

American Express OPEN Forum

Mission: Break-Even

Dan Colarusso The Business Insider

0 Comment

April 3, 2009

Related Topics:

OPEN Forum Message

Business Forecasting 2012

Our special feature on forecasting sheds light on how to choose the right model, offers advice from Jack Stack and more.

Get started

Be the first to comment on this article  

It’s obvious the global economic meltdown is forcing businesses of every size to reconsider how they operate. For smaller business -- especially those newborns among them -- it’s become more important than ever to run lean and show investors that the future is, well, now.

I was speaking to a well-connected angel investor a few weeks ago and I asked him what the biggest warning sign he saw among companies hitting him up for cash.

With credit so tight and lenders as wary as they’ve been in years, he said, the red flag du jour is any business plan that requires a later round of funding to reach break even.  It’s too difficult in this atmosphere to operate with any optimism if you have to get an extra round of funding because banks and VCs have tightened so much.

The advice from our angel: “Even if you need to increase the size of the current round, you have to show me how it gets you to break even, because the chances of getting another round are so long.”

Pam Newman at entrepreneur.com did a nice piece outlining how to figure out your break even point.

Once you figure that number out, though, the tougher part is showing that you have a clear path to get to it.

The issues you have to consider:
  • Are costs stable? Or are you subject to fluctuating value of raw materials or supplies?
  • Do you have enough staffing in place? Or will you need to add heads to produce enough to make your revenue goal?
  • Can competitors start a price war if you see some early success? What will be the impact of that kind of action on your pricing power?
  • Are your facilities up to snuff?
The big, fat question here is whether trying to get a bigger first round of financing will give more of a cushion than trying later to cut your way to break-even because these days, there may not be a second chance.

Related Topics

Related keywords

Dan Colarusso, Article, Budgeting, mission

You might also like

What do you think?

Member avatar

Change social network

You might also like

Crash Courses

Earn 52+ IQ Points

Managing Your Cash Flow

Being able to effectively project, monitor and manage cash flow is essential to the long-term success of your business. Learn how to take a proactive approach toward cash flow management with this course.

Launch course

Most popular

OPEN Forum community

More ideas for success.

Javascript is currently disabled. Please enable javascript for the optimal OPEN Forum experience.

All users of our online services subject to Privacy Statement and agree to be bound by Terms of Service. Please read.

© 2012 American Express Company. All rights reserved.