Runway and RoAS
- Calculate your Runway
- Determine your ROAS
- Simulate your growth with Karmen financing
- Calculate your Runway
- Determine your ROAS
- Simulate your growth with Karmen financing
Runway and ROAS are important financial indicators for managing your business. Not only do they enable you to assess your company's financial health, but they can also guide your strategic decisions to optimize profitability and maintain your financial equilibrium. Let's take a look at how these two metrics can help you make informed decisions, and how you can optimize them to maximize your company's growth while preserving your net cash position.
The Runway is one of the most important indicators for assessing your company's liquidity and analyzing your cash flow. It represents the time you have left before your company's cash flow is exhausted, taking into account your monthly disbursements. It's a true dashboard of your financial security, enabling you to calculate your precise margin for maneuver.
In an economic climate where unforeseen events are frequent, knowing how long your company can continue to operate without new financing is crucial. Your company needs to be able to anticipate liquidity needs and avoid crisis situations that could compromise your financial structure.
This metric helps you to identify discrepancies between your cash inflows and outflows, enabling you to adjust your financial strategy accordingly. Analyzing your runway also enables you to optimize the management of your trade receivables and payables to improve your free cash flow.
ℹ️ For example, if you have €100,000 in cash and monthly expenses of €20,000, your Runway is 5 months. This simple calculation gives you an accurate estimate of how much time you have before you need to take action such as raising funds, reducing expenses or increasing income, while taking into account your future financing requirements.
By applying this formula, you can easily obtain an estimate of your financial leeway. This analysis should be complemented by a study of your liquidity ratios and working capital to get a complete picture of your financial situation.
Elements to be taken into account include:- Your available cash and net cash position- Your average monthly cash outflows and their evolution- Your forecasted cash inflows and their regularity- The evolution of your receivables and of your customer outstandings- The impact of your debts and maturities on your cash flow
Proactive cash management is essential to prolonging your Runway and maintaining your financial equilibrium. Effective cash management enables you to identify levers to reduce your cash outflows or generate more cash inflows.
For example, optimizing your inventories, reducing fixed costs or negotiating more favorable payment terms with your suppliers can help to increase the duration of your Runway. Optimizing your customer payment terms can also accelerate your collections and improve your cash position.
Optimization strategies include:- Improved management of your accounts receivable to accelerate collection- Negotiation of longer payment terms with your supplier payables- Optimization of your cash flow requirements through better planning- Reduction of the time lag between orders and invoices- Creation of a cash surplus to deal with unforeseen events.
At Karmen, we offer financial solutions to help you extend your Runway without resorting to traditional borrowing. With our flexible loans, you can maintain your cash flow while investing in your business priorities, such as marketing or product development, while preserving your equity and financial structure.
Return on Ad Spend (ROAS) is another key indicator that measures the effectiveness of your advertising investments and their impact on your income statement. It tells you how much money you're making from your advertising spend, and how profitable it is. A high ROAS means that your marketing campaigns are profitable, while a low ROAS may indicate that you need to readjust your advertising strategies.
ROAS enables you to assess the profitability of your marketing and advertising activities and their contribution to your cash flow. With this figure in mind, you can adjust your strategies to improve campaign performance and optimize your return on investment.
This metric helps you accurately calculate the impact of your marketing investments on your cash flow, and identify the campaigns that generate the most cash. ROAS analysis also enables you to optimize the allocation of your financial resources between different acquisition channels.
ℹ️ For example, if you invest €1,000 in advertising and generate €4,000 in sales, you have a ROAS of 4, which means that for every euro spent on advertising, you generate €4 in sales. This performance has a direct impact on your company's cash flow and your ability to maintain financial equilibrium.
This metric helps you determine the effectiveness of your advertising campaigns and their contribution to your net cash flow. A ROAS greater than 1 means that you're getting more revenue than you've invested, but the aim is to achieve a ROAS high enough that your investment is profitable and contributes positively to your cash flow.
The ROAS calculation must be put into perspective with your other financial ratios to assess the overall impact on your financial structure and your financing requirements.
To maximize your ROAS and improve your cash flow, there are several levers you can pull while managing the impact on your cash position:
Optimization strategies include:- Continuous optimization of advertising campaigns: Make regular adjustments to your ads to identify the formats and messages that perform best and generate the most cash- Precise audience targeting: Fine-tune your targeting to reach the right prospects who are most likely to convert and improve your cash-flow- Conversion rate improvement: Optimize your website or sales pages to maximize visitor conversion rates and accelerate your cash flow- Test and learn: Test new advertising approaches, analyze the results on your cash flow, then apply the lessons learned to continuously improve your campaigns.
Good practices are essential to ensure optimal performance of your marketing investments and maintain a balance between your marketing outgoings and your generated cash inflows.
Financial planning is a key factor in managing your Runway and ROAS. Rigorous forecasting enables you to anticipate financing needs, better manage your investments and make informed choices to support your company's growth while preserving your financial equilibrium.
One of the first steps in financial planning is to anticipate future cash requirements and analyze the potential mismatches between your cash inflows and outflows. This enables you to avoid surprises and make financial decisions with complete peace of mind.
A regular cash flow forecast lets you know whether you'll need to raise funds, borrow or cut costs to maintain your Runway. This analysis must include the evolution of your trade receivables, trade payables and fixed assets.
The forecasting analysis must include:- Cash flow trends over 12 to 18 months- Impact of seasonal variations on cash inflows- Debt and loan maturity management- Optimization of customer payment terms- Identification of periods of critical cash needs.
WCR (working capital requirement) management is essential to maintaining good financial health and optimizing your company's cash flow. Good digital marketing budget management enables you to effectively manage your cash flow and adapt your spending according to the performance of your campaigns.
Optimizing your working capital requires a detailed analysis of your receivables, inventories and payables. Your company must be able to maintain an optimum balance between its financial resources and its operational needs, to avoid cash flow tensions.
Karmen offers you several solutions to optimize your Runway and ROAS while preserving your financial structure and liquidity. We offer flexible short-term loans and financial expertise to help you make the best decisions for your company's growth.
With Karmen Loan, we offer loans ranging from €30K to €5M, with terms from 1 to 24 months. These loans are specially designed to improve your cash flow and maintain your financial equilibrium:
Our solutions enable you to:- Strengthen your operational cash flow without impacting your equity- Finance your strategic marketing campaigns to improve your ROAS- Optimize your WCR and your operating cycle- Manage the time lag between cash receipts and disbursements- Sustain your growth without compromising your net cash position
Our calculator allows you to obtain a detailed analysis of your financial metrics and calculate your precise needs:
Features include:- Calculation of your current runway and cash flow projection- Measurement of ROAS by advertising channel and impact on your collections- Projection of future financing needs based on your cash flow- Simulation of different growth scenarios and their impact on your cash flow- Analysis of your liquidity ratios and financial structure
At Karmen, we go beyond financing. We can also help you analyze your financial performance and advise you on how to optimize your results. Our team of experts is here to help you maximize your profits while preserving your cash flow and effectively managing your receivables and payables.
Our support includes:- Analysis of your cash flows and identification of levers for optimization- Advice on managing your accounts receivable and payment terms- Optimization of your financing requirements according to your activity- Monitoring of your financial ratios and your financial balance- Strategies for creating a sustainable cash surplus
Runway and ROAS management is essential to ensure the sustainable growth of your business and maintain an optimal financial balance. These metrics enable you to make informed decisions and optimize your investments to maximize profits while effectively managing cash flow.
By analyzing your cash receipts and disbursements, and the evolution of your receivables, you can anticipate your financing needs and manage the natural timing differences in your business. With Karmen, you can benefit from customized support to improve these key indicators and build controlled, sustainable growth, without compromising your net cash position or financial structure.
Contact us today to find out how we can help you optimize your financial performance, accurately calculate your cash requirements and propel your business to new heights, while preserving your financial equilibrium and liquidity.
