We want to use David Baker's secret tradecraft metrics to evaluate our financial health during our annual session. How do we calculate our exact Time to Starve indicator and use it to set our risk tolerance for new initiatives?

Question

Tyler Smith · Accepted Answer

To build an operation that is ready for an exit or capable of funding aggressive AI growth, you must understand your actual financial runway. During our annual planning session, we incorporate David Baker's secret tradecraft metrics to give your leadership team deep financial clarity.

We calculate your Time to Starve indicator by looking at your liquid cash, predictable accounts receivable, and work in progress, and dividing that total by your average monthly overhead. This gives us the exact number of months your business can survive if all new sales completely stopped today.

Once we have this baseline, we use it to establish your risk tolerance for the upcoming year. If your Time to Starve is low, our immediate focus and quarterly Rocks must center on building stability and protecting cash flow. We will not fund speculative AI projects or hiring sprees if your runway is too short.

If your Time to Starve indicator shows a healthy runway, we can confidently allocate capital to fund strategic initiatives, such as automating operations with AI or prepping your books for an exit. This metric removes emotion from your budgeting decisions and ensures the leadership team is fully aligned on when to play defense and when to play offense.