Back-of-the-envelop numbers to keep in mind for HW founders


This is where your Gross Margin (GM) should be. If you start with a 30% GM or lower, most likely you won't make it to the path of growth.


120 days

Try to hit this mental barrier in terms of Cash Conversion Cycle (CCC), the average number of days it takes you from paying cash to suppliers to receiving cash from your clients. Industry leaders such as Samsung have their CCC at around 80 days. While Apple famously is able to squeeze credit out of their suppliers, making their CCC below 60 days. The shorter the CCC, the less capital is trapped in the work in progress and inventory stage therefore, the less outside capital is needed to fuel growth.



This is probably the sort of annual revenue level where you can first see opportunities of being acquired for real money, e.g. $200M. Assuming this is your revenue goal in 5 years, back out mathematically how you should build your marketing/sales team and how you should drive them to hit year-over-year revenue target. This also helps you plan out your funding rounds.



If things don't go well and you're forced to sell the company, this might be what you could recover for every 1 good US patent.



Is UX the value driver in banking?

B2B negotiation - pricing should be the last topic to discuss