Knowing — and Sharing — Your Zero Cash Date

One of the most important operating metrics in your SaaS start-up, if you aren’t predictably cash-flow positive, is your Zero Cash Date (“ZCD”).

You hear a lot about SaaS metrics, but this one doesn’t often come up.  It should, and should be very near the top of the list of core metrics.

Your Zero Cash Date is the most likely date, at your current spend/burn, that you will run out of cash.

Many start-ups don’t track this religiously, or with 100% certainty, and just as importantly, don’t always share it with every single one of your investors — and your employees.   I didn’t track it as carefully in my first start-up, but it was the #1 metric for my first investor in EchoSign, Storm Ventures.  For good reason.  Once I tracked it super-carefully, I found it super-helpful.  It aligned everyone in the company, and all the investors (including F&F), on exactly what our runway was, and by when we had to demonstrate objective success.

Your ZCD is nothing to hide, and it should change every 60 days or so, depending on how revenue comes in, and how expenses flow.  I think it’s also OK to have a primary ZCD, the one you use as your core company metric, and a more conservative one for your own planning.

At least, it took a lot of stress off my plate having everyone understand what the ZCD was.  That way, we all intuitively understood what we were building to, what the rough limitations were on spending — and why they existed.  Until we reached cash-flow positive.  More on that, next.

Last Dollar Road image from here.

There are 3 comments

  1. Siobhan Green

    cashflow is king… our business model was to start with consulting and build a product out of it. This is how we were able to bootstrap the firm – we have been bringing in revenue from day one.

  2. Quora

    What happens after you raise VC and bring on your new partners?…

    A few thoughts: 1. Remember you have to prove yourself, still. Yes, you got the $$$, and they really can’t get it back, and probably they can’t fire you if they don’t control the board. But your VCs barely know you. You still have to prove yourself …

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