I didn’t study finance. I learned startup money through expensive mistakes.

Here’s the basics I wish someone had explained simply.

Cash vs Revenue vs Profit

Different things. Founders confuse them constantly.

Revenue: Money customers owe you (or paid you) for products/services.

Cash: Money in your bank account right now.

Profit: Revenue minus all expenses.

You can have revenue and no cash (customers haven’t paid yet). You can have cash and no revenue (you raised investment). You can have revenue and no profit (expenses exceed revenue).

The one that kills companies? Cash. When it runs out, you’re dead. Regardless of revenue or profit.

Runway

How long until you run out of cash.

Calculation: Cash in bank / monthly burn rate = runway in months

If you have $120,000 and spend $20,000/month, you have 6 months runway.

Know this number always. Update it monthly. Panic when it goes below 6 months.

Raising money? Start 6 months before you need it. Fundraising takes longer than you think.

Burn Rate

How much cash you spend per month.

Gross burn: Total monthly spending. Net burn: Monthly spending minus monthly revenue.

If you spend $30,000/month and make $10,000/month, your net burn is $20,000.

Net burn is what matters for runway calculations.

Unit Economics

Does each customer make you money?

Customer Acquisition Cost (CAC): What you spend to get one customer. Lifetime Value (LTV): Total revenue from one customer over their lifespan. LTV:CAC Ratio: Should be 3:1 or higher.

If you spend $100 to acquire a customer who pays you $50 total, you’re losing money on every sale.

Volume doesn’t fix bad unit economics. It accelerates failure.

Gross Margin

Money left after direct costs.

Calculation: (Revenue - Cost of Goods Sold) / Revenue

If you sell software for $100/month and it costs $20/month in hosting and support, your gross margin is 80%.

Software companies should have 70-90% gross margins. If yours is lower, figure out why.

MRR and ARR

Monthly Recurring Revenue and Annual Recurring Revenue.

MRR: Total monthly subscription revenue. ARR: MRR x 12.

For subscription businesses, these are your primary metrics.

Track:

• New MRR (from new customers)
• Expansion MRR (from upgrades)
• Churned MRR (from cancellations)
• Net new MRR (new + expansion - churn)

If churned MRR exceeds new + expansion, you’re shrinking.

Churn

Percentage of customers or revenue you lose each month.

Customer churn: Customers lost / total customers Revenue churn: MRR lost / total MRR

5% monthly churn means you lose half your customers every year. That’s bad.

Good SaaS has under 3% monthly customer churn. Great SaaS has under 1%.

Revenue churn can be negative if expansion exceeds losses. That’s called net negative churn. It’s the holy grail.

Break-Even

When revenue equals expenses.

Calculation: Fixed costs / gross margin per customer = customers needed.

If your monthly costs are $30,000 and each customer contributes $100/month after variable costs, you need 300 customers to break even.

Know this number. It’s your survival target.

Cash Flow vs P&L

Profit & Loss (P&L) shows accounting profit. Cash flow shows actual money movement.

You can be profitable on paper and still run out of cash.

How? Timing. You pay for things before customers pay you. You have big expenses some months and revenue in others.

Manage cash flow, not just P&L.

What to Track Monthly

Minimum viable finance:

1. Cash balance
2. Monthly burn
3. Runway
4. MRR (if subscription)
5. Customer count
6. Churn rate

That’s it. Everything else is detail you can add later.

Review these numbers monthly. Actually look at them. Understand the trends.

The Founder Finance Stack

Xero or QuickBooks: For actual accounting. $50-100/month.

Spreadsheet: For forecasting and tracking metrics. $0.

Dashboard (optional): ChartMogul or Baremetrics for SaaS metrics. $50-200/month.

You don’t need complex tools early. You need discipline to look at the numbers.

The Uncomfortable Truth

Most founders avoid finance because it’s scary.

The numbers tell you things you don’t want to hear. That you’re burning too fast. That customers aren’t staying. That the business doesn’t work yet.

But ignoring problems doesn’t solve them. It just lets them get worse.

Look at the numbers. Understand them. Act on them.

That’s how you avoid being surprised when the bank account hits zero.