About this Course
If you ever seek financing from a bank or angel investor, you are likely to be asked about your break-even sales rate. That’s because your break-even sales rate is intrinsically tied to the amount of cash you are likely to need to maintain and grow your business to the point where it’s sustainable.
The life of a young business can be tenuous and difficult. Some that navigate what we call “The Valley of Broken Dreams” may not achieve their founders’ objectives. Upfront thought about the requirements for survival and success can help you adapt more quickly and effectively to the realities you discover during your business journey.
This course will help you develop skills to:
- Understand the typical phases of the startup cash flow cycle
- Create a first pass – and useful – estimate of your startup expenditures
- Figure out what your break-even point looks like – from financial (rate of cash receipts), operational (rate of units of product sold), and human (rate of potential customers converted into customers) perspectives
- Estimate your total market population
- Evaluate how advertising and word-of-mouth marketing approaches can affect how long it takes for you to achieve break even
By the end of this course, especially if you make thoughtful notes on each of the Questions to Consider, you’ll have a better understanding of your cash requirements during the early phases of your business, and, more importantly, you’ll have a better idea of actions you might take to reduce the amount of time it takes you to reach break even.
The lessons in this course don’t require a business background. We’ve done our best to make the materials clear and understandable to curious and engaged beginners. That said, we learned a lot ourselves while authoring these materials, so we think that experienced business people will find these approaches provocative and useful, too.
This isn’t intended to be the kind of course you’re likely to find at school. Nevertheless, we don’t pull any punches. Human scale businesses can be complex and demanding, so we owe it to you not to present watered-down material. In order to convey the most useful information with the least amount of jargon, we use illustrations, graphics, and other visual tools whenever possible.
Join the Conversation
Throughout and beyond this course, we invite you to engage us, your peers, and others in conversations about your business. That’s where the real value is created. If you have a question, please ask it – others will benefit from your curiosity and courage. If you have suggestions about how to improve this course, please let us know. We strive to do our best work, but we can always improve with your help.
We have tried to make the lessons in this course modular. That is, we hope that they’ll stand alone. You should feel free to pick and choose according to your interests, needs, and background.
A Note About Quizzes
Some of the following lessons incorporate a quiz, but this course isn’t about getting a grade. The purpose of the quizzes is to help you assess your understanding of the key ideas in each lesson. They aren’t required by any means, but we hope that you’ll find them useful.