Dear SaaStr: Is It Normal for a Startup to Not Disclose Burn Rate and Other Details to its Employees?
It really varies, but in my ecosystem, I’ve seen more transparency over the years, which is good. Transparency builds trust:
- I’m 100.00% in favor of transparency in general.
- And specifically, I believe employees should generally know almost as much as you share in board meetings
- If you have board meetings, just take 80% of the slides, and then use them at a company meeting right after
But … on some of the really tough news and sometimes, on burn rates … and in particular, Zero Cash Dates (when you run out of money) … I’m on the fence unless you carefully and thoughtfully provide context.
- I do think employees should know how much you are burning each month, with the proper context. That way they can understand if they are overspending, if we are over hiring, etc.
- But too much sharing of bad news can be too much to process. The thing is, companies almost run out of money all the time. And they run the gas tank down to Almost Empty. I do think you should share your Zero Cash Date as well as your burn rate. But. Employees get confused. At least, I think make sure you provide context. What the ZCD means.
- Many employees will sort of check out will too much bad news. The 5:1 ratio of good:bad news holds even at start-ups.
Information without proper context to understand it can undermine your transparency goals.
It’s easy to fatigue the team with too much bad news. Be honest, direct, and treat them at least as well as your investors. Just don’t spook them, unless there’s really truly a reason to be spooked.
Maybe share 80% of what’s on your mind, and 80% of your metrics. That’s about right. And about enough.
(image from here)
