Unit economics and finance
Extending runway
Hiring pace, pricing, collections and cost cuts — the levers that lengthen the fuse, and a worked cut plan.
Once you can compute net burn and runway and run the default-alive test, the next question is what to pull. The goal is not a prettier burn chart. It is a trajectory that clears the fuse.
Concept
Burn multiple asks how much growth that burn bought: net burn / net new ARR. Cutting the efficient growth engine to decorate the burn chart is a bad trade. Details live in efficiency metrics.
Levers, in order
- Slow hiring — payroll is usually the majority of burn. Not hiring ahead of proven need is the cleanest fix.
- Raise prices / tighten discounting — if you have demand, price is the cleanest lever.
- Collections — shorten payment terms, require annual prepay, chase AR. Cash timing is runway. See working capital.
- Cut non-people opex — vendors, ads with bad payback, unused SaaS seats, cloud waste (FinOps).
- Reallocate — pause low-ROI projects; focus on revenue-critical work.
- Layoffs — sometimes necessary to become default alive. Treat people well, cut deep enough once, communicate clearly. Three shallow rounds destroy trust and still leave you dead.
Ad spend is a common false friend: it props up top-line while burning cash. If paid growth is the only growth and payback is long, you are buying vanity metrics with runway.
Trade-off
Grow into profitability vs cut to profitability. If growth is efficient and capital markets are open, measured burn can be rational. If you are default dead and markets are shut, cuts and revenue focus beat "staying the course." Know which regime you are in monthly.
A worked cut plan
Cash $1.2M. Net burn $150k/month → 8 months runway. Revenue $50k/month, growing 5% MoM. Gross burn ≈ $200k.
Default-alive check: months to $200k revenue at 5% MoM from $50k → 50 × 1.05^n = 200 → 1.05^n = 4 → n ≈ ln(4)/ln(1.05) ≈ 28 months. Cumulative deficit far exceeds $1.2M → default dead.
Cut plan: reduce gross burn to $120k (cut $80k/month, mostly people and ads). Keep 5% MoM growth. Break-even when revenue ≥ $120k:
50 × 1.05^n = 120
1.05^n = 2.4
n ≈ 18 monthsCumulative deficits are much smaller. With $1.2M you may clear default alive. Painful — and better than a surprise zero.
Common mistakes
- Cutting the only efficient growth channel. Watch burn multiple, not only burn.
- Three shallow layoff rounds. Cut once, deep enough, humanely.
- Ignoring collections. A pricing win with net-60 invoices may not hit the bank in time.
Check yourself
Revenue $50k growing 5% MoM, gross burn cut from $200k to $120k. About how many months to break-even?
About 18. 50 × 1.05^n = 120 → n ≈ 18.
Why is "slow hiring" listed before layoffs?
Not adding burn is cheaper and kinder than adding it and then removing people.
Key takeaways
- Primary levers: hiring pace, pricing, collections, then cost cuts. Layoffs last, done once.
- A cut plan is a default-alive spreadsheet, not a vibe.
- Do not kill efficient growth to decorate the burn chart.
- Recompute after every material hire or spend change.
Further learning
Next, an early milestone that buys time: ramen profitability.