A tech start-up with over $1 million in annual recurring revenue (ARR) was struggling to secure new funding. Despite early promise, the company faced significant cash burn of mid six figures per month. 

The management team was exhausted, and revenue growth was slower than expected. The business had expanded prematurely into the US market, which made up about one-third of ARR but increased operational costs, particularly in sales. Pulling back from the US was difficult given the revenue contribution.

The Challenge

The start-up’s cash flow situation was critical. Pipeline growth was slow, sales conversions were lagging, and costs were mounting. The pressure on the operational team was intense. Without clear financial visibility, the founders struggled to make decisive moves.

Our Approach

We developed a recovery plan focused on cash flow forecasting, giving the founders a clear view of the cash runway over the next 12 months. 

Our analysis identified that reducing headcount by about nine people was necessary to achieve positive cash flow within nine months. We presented this plan clearly and objectively to the management team.

Outcome

Despite the clear path to recovery, the business chose not to proceed with the recommended redundancies. Instead, the founder raised additional capital on very unfavourable terms. This resulted in significant equity dilution and loss of control compared to previous funding rounds.

Six months later, a promising US government grant offer was withdrawn due to changes in administration. The founder remained under severe stress, and the business was again facing uncertainty with ongoing discussions about voluntary administration or other insolvency options to restructure the company.

Delaying tough decisions can increase financial risk and limit options. Early action on cost control and cash flow management is critical in high-burn, fast-growing businesses. Without it, founders risk losing control and facing more painful restructuring later on.