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Burn rate (4): black beans and rice (or: cutting costs for a longer runway)

Of course, efficiency is a virtue. Waste is… wasteful, makes everyone worse at their jobs, and reduces the number of possibilities open to you and your team.

Knowing where it goes

Good financial management is essential for this, of course: you need to know what’s being spent, on what and who by before you can make savings. Get help!

The difference between 1% and 2%

The difference between 1% and 2% “profit” on what you do isn’t 1%: it’s 100% – that is, an apparently little gain in efficiency will see you double the money you have on hand. Every little helps.

A longer runway

The title of this post is a nod to a Seth Godin riff about living on black beans and rice while starting your business. The lower you keep your costs, the less you need to earn, the freer you are to experiment and try new things… and the longer you’ll last between large donations. In short, your organisation has a longer “runway” as you work to reach sustainable operations and growth. More time to try new things, more time for mistakes and course-corrections.

A cautionary note

Clayton Christensen is excellent on the dangers of focusing too much on efficiency innovations. Short version: cutting the wrong costs makes you look more efficient in the short run but can undermine the thing you’re there to do in the first place. Here he is at Startup Grind:

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