How does it feel getting your startup to breakeven?
I’m terrible at marking milestones. As soon as I hit one, I’m on to the next, so they drift by, uncelebrated into the distance, while the next, more pressing, challenge comes into focus.
That said, I’d like to take a moment to acknowledge a milestone we’re just about to hit at Float. Hitting “cash flow positive” has been a goal for so long.
What does it feel like to finally get there?
Breaking even has been a goal of mine from the very beginning. Despite very much being a marker on the way to something a lot bigger, it’s actually a game changer. Of course all businesses want to do much more than just break even, but getting there means that you’re not facing imminent death, or an imminent funding round, and that brings a freedom that I wasn’t expecting.
Knowing that we no longer have to hit a certain metric to warrant a funding round, just to keep the company alive, has allowed me (and our leadership team) to take a step back and think about the kind of company we really want to build. A sustainable company, that serves it’s customers by bringing them value, and serves it’s employees by valuing them as individuals, helping them grow and become better at what they love to do.
Does that mean we want to slow down, or not grow? Absolutely not! But it does mean that we’re excited about growth for reasons that are aligned with what we really want in life, and what is important to us. We want to grow because we believe in what we’re doing, and the positive impact that growth will have on the ecosystem we’re a part of.
When I finished my last exam at Uni, before I drove out of the car park, I sat there and played Tom Petty — Free Fallin’ very loudly, before driving off feeling confident it was the last time I’d ever sit another exam! This has become a bit of a thing for me, so a few weeks ago, I found the opportunity to take a moment to park the car, close my eyes, and mark the milestone with Tom’s dulcet tones again!
Most founders are very aware of the failure rates of startup businesses. Some say 9 out of 10 startups fail in the first 5 years, others quote 50%. Whatever the data, the point is that a lot of new businesses don’t make it. That’s a tough reality to face when you’re a founder and you’re supporting a family, and a team, and the product/idea is also your baby.
The relief, hope, and belief that we’ve completed stage one of the journey, is a moment to savour. If past experience is anything to go by, the moment won’t last!
The penny drops.
I think the best moment for me was actually when Inga, our Ops Manager, who had been working on our budgets and projections, showed me a graph in Float of our projected cash flow.
The lines in the graph above show our cash flow, i.e. our bank balance, over time.
The blue line is our base scenario, and what we believe will happen if we’re on budget with moderate growth in revenue. The pink line shows a scenario where our sales stay flat, and we maintain our current expenditure. The graph serves as both a warning and helpful guideline to the rate our expenditure is increasing month on month.
When I showed this graph to a friend and advisor recently his eyes lit up and he told me that for him this graph really highlights how much cash the business is willing to risk. My job isn’t to keep the blue line flat, it’s to keep it from hitting the bottom while investing the cash we do have in the most effective way possible to fuel growth.
I really do believe that every growing business and every board should be looking at a graph like the one above at least every month and every board meeting.
The moving goal-posts
Without getting complacent, reaching breakeven represents a freedom, to not constantly be chasing, or accepting calls from, every investor that comes to town. Float is an angel-backed and customer-funded business, rather than a VC-backed company, so we don’t need to achieve a billion dollar valuation to be successful, but even so, this marks the beginning of a new stage of the journey, having so much more we want do that involves building a great product, a great team and creating an inspiring place to work. It really feels that, after 7 years, we’re just getting started.
Naturally, as the team grows (currently 15) so do the costs, and the breakeven figure keeps rising, but the pace of our expansion can be matched by the growth in revenue, or if needs be, debt, and that’s sustainable growth.
Now we’ve hit this threshold, what are the next milestones for Float?
- Churn reduction. Churn is a killer to SaaS companies, and it’s often because the user experience isn’t up to scratch. Our users are busy people and don’t stick around for products that they don’t love. We’ve been doing a lot of talking to users, and testing, to keep making Float more intuitive and engaging and easier to get started with.
- Value-based pricing. Pricing is often massively overlooked in startups, but getting the price right, according to the value that is being delivered, is one of the best things you can do to improve the viability of the business model.
- Sustainable growth. We’re very aware that there are a huge number of businesses out there who could benefit from Float but haven’t heard of it yet or had the time to set it up. Our job is to reach them, and help them get started!
- Building out a quality senior leadership team. We’re looking for leaders that share our vision and values and will help bring leadership and management for the next stage of growth.
I said, I’d talk about how it feels to get to this point. It feels great. I loved the thrill of starting up seven years ago, that was great, but this is better. I’m excited, energised and more optimistic than I’ve ever been.
One unexpected thing about hitting this point in our company’s journey is that it’s helped me see that business really can make a contribution beyond just serving our customers and making payroll. Even small things like buying some drinks for the CodeBase Christmas party, or being able to give to causes we believe in has helped me realise that giving back is an important driver for me. Giving back to our team, and helping inspire and release the next generation of entrepreneurs and startups that can make the city a great place to live and work.
It’s been great to be part of the ecosystem in Scotland; we now have three world-class significant startup events every year*, and companies like Skyscanner, FanDuel and FreeAgent have played a huge role in supporting these, and smaller gatherings. This has inspired a wave of new startups coming behind them, and I hope that at Float our team can play its part in that over the next few years.
Colin Hewitt is fascinated by startups, the future banking, and finance. He’s the CEO and co-founder of Float. Based in Edinburgh, Scotland.
Joel from Buffer writes a great article on what it feels like when you’re rapidly heading towards the end of the cash runway, and the action they took to avert it.