Oct 25th, 2008
Keeping the Burn Rate Low
I hear a lot of talk on the tech podcasts I listen to about “keeping the burn rate low” in regards to tech companies, basically meaning that if you’re relying on what could be very quick to dry up venture capital to operate, try to go through it as slowly as you can because the longer you can survive, the better chance you have for the economy to pick up.
What’s interesting about the statement, “Keeping the burn rate low,” is that it’s essentially saying, “Be frugal.”
I’m not quite sure why it’s more important to be frugal when times are tough than when they’re not quite so tough, but basic principles of frugality–eliminating waste and cutting costs without sacrificing needed quality–will help businesses just as much as they help individuals and families. Doing these simple things can help keep your business running–both in positive financial times and those that aren’t quite so positive.
I think that when the times are good, people just don’t expect them to become bad. They think each time “This is the new age of prosperity!” Only it’s not, not forever.
Of course, sometimes frugality means opportunity cost so if the company can afford the do something and money isn’t tight right now it should go for it.