REDUCE YOUR BURN RATE
1- My favorite hack of the year was qualifying for USAA insurance because my father-in-law was a vet. When insurance carriers told us we had no alternatives but to pay the year-over-year increases, I did the research. I saved about $20,000 between homeowners, auto, and general liability. They offer commercial insurance too!
2- My dad bought used office furniture for our company offices. Everything else was new– the walls, lighting, flooring, and equipment. So why were we buying used furniture? There is massive savings on high quality, new or excellent condition, furniture being resold after businesses close. Plus, it’s preassembled (removing that labor cost)! Save on this significant cash outlay and get something that will not end up in a landfill. Save yourself the time and cost of buying replacements over and over.
My first office was decked out in Knoll furniture from a used dealer. I could not have afforded it retail. It was cheaper than what I was considering online and upleveled my space. And when I moved, I sold it for almost what I paid for it because of its quality.
3- Getting a car for example? Talk to your tax professional about appropriate ways of categorizing your car expenses. Can you pay for your car with pre-tax dollars?
When thinking about cost. Let’s pretend you can afford the used Mercedes monthly loan payment. But, has the higher cost of Mercedes parts been factored into the maintenance cost? What about the increase in insurance cost when switching from a Toyota to a Mercedes? Put together full numbers with realistic increases when determining your spending so that your burn rates don’t skyrocket unintentionally! And remember, you have to make a profit to “write off” against it. Write-offs are not free money.
4- Recently I realized I was paying a lot for an app made to look like Chat GPT that I had accidentally clicked late at night. I wouldn’t have caught this without my bi-annual audit. Also, are you using what you are paying for? No, then cancel it.
Is your business paying for subscriptions you use for your business? Or do you have your personal tap-to-pay covering them? You’ll likely save money using pre-tax dollars.
5- I chose to work with a fulfillment center at the launch of one of my companies. After reviewing my greatest expenses on my financials yearend, I determined that the value did not justify the fulfillment center cost, which had a minimum contract cost with pricey add-ons.
When I initially evaluated the contract, it was reasonable based on my assumptions without a track record. But, assumptions are only assumptions often neglecting intangibles. By canceling the fulfillment center, I removed a major monthly expense and took control of the cost of shipping myself. It also gave me direct visibility and connection with my customers and the nimbleness to add fun details and perks to my shipments at this stage of the company. Without taking the time to review this expense, I would not have delved deeper into the value and my options. The outcome resulted in significant financial rewards.
I use a cash flow model, which I also share with my clients, to manage my burn rate in my business and personal life. These are customized spreadsheets that track expenses. They allow me to:
have visibility of expenses, so I can make conscious decisions about increasing or decreasing my costs
track the history of expenses in comparison week after week or month after month (paying attention to increases and decreases)
project financial needs
test out business ideas as to how they will affect my cash before they generate revenue
And many other benefits…
Do you know what your burn rate is?