Building Next Level Budgets

Every business should have a budget, regardless of size. However, if you are looking to eventually raise venture capital for your business, having a clear vision and well-defined budget is essential. According to FUNDZ, the median Series A funding in the US in 2023 was $17 million, with a median pre-money valuation of around $50 million. Achieving a valuation of this level requires sales generation in the tens of millions. Managing this amount of funding alongside projected sales requires a deep understanding financial planning and budgeting. 

Projecting Sales

Before you start the fundraising process, you should have at least 6 months of runway (or 3-4 months if you are raising funds in 2023😫).  {READ MORE ON RUNWAY} Start by analyzing your projections and think about how you can deliver specific sales targets, then drop that by 10%.

Achieving a valuation of $50 million, or more, requires you to generate at the very least $5 million in ARR. This means that you need to have a well-defined sales strategy and a plan for how to increase sales over time.  VC’s wan to see companies that can reach unicorn valuation {READ MORE ON UNICORNS}; however, in the short run, you will also want to start thinking about sharing lower near-term sales targets. You also need to ensure that you have a good understanding of your target market and how to reach them. 

Future Thinking Post-Series A Budget

Once you are funded, you want to hit within 90% of your budget to ensure funding in future rounds so be sure to dream big, but be realistic. The success of proper budgeting will influence future fundraising and help you avoid a down-round.

The biggest difference in your budget post-Series A vs pre-Series A is that you are likely past establishing product-market fit. As a result, the post-Series adjusted budget will be much heavier in sales and marketing, with a corresponding reduction in product development. This is because the focus has shifted from product development to customer acquisition. Another difference is that you will likely be hiring more functional experts. This will involve a shift away from the product team, as the focus is now on growing revenues and marketing the product. Key positions you will be looking to fill are experienced VPs who can help your company grow from $1 to $10 million. {READ MORE ON 1-10} Additionally, you will be looking to invest more in customer support and customer success. This will involve hiring more customer service staff, as well as investing in technology and software that can help you keep track of customer feedback and manage customer relationships. Finally, you will be looking to invest more in data and analytics. 

Ready to get started on that budget? 🥳

Pillar VC has  some useful tools for a DIY approach.  You can find a copy of their plug and play budget by clicking on the image below.  

⬇️  ⬇️  ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️ ⬇️

budget template
Building Next Level Budgets 3

In addition to this, they also recommend this approach to building it yourself. “Once you know the amount you ideally want, let’s say $12 million, cut it down by 25% and reconstruct your baseline plan around raising 25% less, e.g. $9 million. Start by assuming the smaller raise because working with less cash is a good discipline that will force you to set priorities more carefully. If your funding efforts are going well, there will be excess demand to invest and you can walk the round size up later. If you are not doing well and cash is hard to find, you will be glad you set expectations a bit lower.”

Have enough on your plate and not interested in taking on this endeavor yourself, our Fractional CFO team is standing by to help.

Good luck and Godspeed, fellow adventures and future world shapers!  🚀

Share this post

Leave a Reply

Your email address will not be published. Required fields are marked *