How to extend your runway

With talk of an economic downturn and a slowdown in venture capital funding, startups need to figure out how to get to profitability faster extend their resources without raising additional money.

Heřman Kopkáně is CFO of the first startup unicorn in the Czech Republic, Rohlik Group. He led the online grocery business through its €220m Series D and is now focused on growing the business runway to not have to collect donations for a few years. He recommends startups to plan at least two years runway to hold on until the market stabilizes – and cut down where possible to avoid laying off half their workforce, as many others have been forced to do.

In our Startup Life newsletter, Heřman (who spoke at Sifted Summit yesterday) shares his top tips on how to do it extend your runway.

Slower your expansion plans

Expanding into a new region or market becomes expensive very quickly. For Rohlik, expansion means building new fulfillment centers, buying cars, expanding the team and, of course, marketing.

Cancel all plans for new markets to reduce the burn rate. slow the growth of newer ones you just introduced; and double the regions you are already in. We’ve delayed our launch in countries where setup is expensive, like Spain and Italy, and slowed our expansion in Germany.

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Go for higher spend, not new customers

If you are a B2C company and your The business model allows you to encourage customers to buy more by offering a wider range of products, better service and offers for multiple purchases. Then the average transaction value makes each delivery more profitable. When customers are making small purchases with limited margins and shipping costs are increasing, it just doesn’t work.

Centralize the budget

In startups, budgets are often allocated to individual departments or projects. For example, if you expand to Spain, the Spanish team will have its own runway; If the money runs out, the company can leave the country.

If you want to be profitable – instead of just focusing on growth numbers – change your Strategy to think of it as a central budget. Each moving part should support the other. Going back to the example of Spain: if there is a livelihood crisis and nobody has extra money to spend, slowly your Marketing activities to a minimum – save money without having to shut everything down.

Centralizing the budget also creates better visibility for the CFO to know when to speed up different functions again.

Communicate that you prioritize profit over growth

You want the team to think about every penny they spend. The general message is: Saving in all areas saves the company and jobs.

They want there to be a business case for every expense, as teams often underestimate the costs and overestimate the benefits. Do you Yes, really Do you need this software? Yes, it might make you a little bit more efficient, but the payback isn’t fast enough. Will this new marketing channel really boost our sales? Will new furniture really improve morale enough to increase performance?

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You’re not trying to save 20% your Spending, you don’t want to spend anything unless absolutely necessary to survive.

To keep your Investors in the loop

Your Growth plans will look different than what you originally pitched to investors. You have to discuss your reassessment of the market and your Strategy with them to keep them on board long-term – you might want to raise more money from them in the future.

To explain your Investors who, due to the market situation, will not accept you in the foreseeable future, or at least not on favorable terms. Explain that you won’t have a liquidation event in the next few years because you can’t top up – or at least not one with a high internal rate of return (IRR). You have to know you’re playing the long game.

Speaking of which…extending your runway

🔍 Focus on the basics. to get through this time Time, you need to look at your acquisition costs, your pricing strategy, and the way you manage your money.

💵 Let your CFO do the hard work. shift Power for your CFO during the downturn might be just what your startup needs to save money. After all, that’s what they’re trained for!

💰 How to manage cash flow in a crisis. An oldie, but a goodie, from the Sieved Archives.

⛓️ Restrictions are good. An excellent one Twitter thread how a startup extended its runway.

🥾 Bootstrapping is the way to go. Avoiding VC funding can help you: a healthy balance sheet and solid device economics right from the start.

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Anisah Osman Britton is co-author of Sifted’s Startup Life newsletter, which is published weekly on Wednesdays. Sign her upe.

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