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Day 7 of decoding startup terminologies...

What is the significance of burn rate in businesses and why are Sharks so interested in knowing the burn rate of a business?

Read below ⬇️ to know.

The business which is not making profit would be burning some money to sustain, right ?

This burn would include all the marketing cost, salaries, operational expenses, cost of goods etc. So, whatever loss the business would be incurring on a monthly basis would be its monthly burn rate.

Now Sharks or investors are interested in this number to know how sustainable a business is. Basically there would be one of these 2 scenarios where a business needs to create balance.

1️⃣ If the burn rate is very high, there might be liquidity issues in future (in case of lack of funding) and the business might also have to shut its operations if the burn rate is too high.

2️⃣ If the business is not doing enough marketing/branding and is spending too less or the burn is low, they might not grow in the pace they want and might be left behind by the competition.
#Business #startup #entrepreneurs #marketing #sharktank #burnrate 

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