If you realize your burn rate is too high, or your business is trying to bounce back from a rough patch, here are some steps you can take to help decrease it:
- Reduce Costs
Review the costs of acquiring and manufacturing the products that your company sells as well as your operating expenses closely. Are there any extraneous expenditures that you can cut? Go through your last few months of invoices and credit card statements to help you see what expenses you could do without.
- Increase Revenue Streams
Establish alternate revenue streams, even as a temporary measure, by diversifying or making changes to your business structure. Moving a portion of your business online, partnering with other businesses and identifying new customer segments are just some strategies to increase your revenue, that if done successfully can become a more permanent fix than simply reducing costs.
A significant way to reduce your burn rate is to be careful of your hiring; only hire when absolutely necessary. Primarily rely on contract and outsourced work for non-core functions such as accounting, finance and human resources. Though these are essential functions for any business, they can be expensive to hire full-time. It is more financially astute to outsource these functions on an as-needed basis.
Using the burn rate analytics, you gain a clear understanding of your business’ incoming and outgoing cash, how long you can continue your current path and whether or not you need to make adjustments to achieve your goals.
Why is 79% the average benchmark?
79% is reported by Stats Canada as the average operating ratio for most businesses in Canada. We use this as a rough guideline to help you know how you compare. Every industry is different and we will be providing you more personalized benchmarks as we continue to optimize Driven Insights.