The SaaS P&L

Running a business without a **Financial Model** is like flying a plane without an altimeter. You need to know exactly how much cash you have and how long it will last.

1. Runway and Burn Rate

• Gross Burn: Every dollar you spend each month (Hosting + Salaries + Coffee).
• Net Burn: Your Monthly Loss (Gross Burn - Monthly Revenue).
• Runway: How many months until you run out of cash. (Total Cash / Net Burn).

2. The "Default Alive" vs "Default Dead"

If you stopped raising money today, would your revenue eventually grow to cover your costs? - **Default Alive:** You are profitable or on track to be. - **Default Dead:** You will run out of money unless you raise another round. **Architect Tip:** Always aim to be 'Default Alive' as early as possible. It gives you 100% leverage when talking to investors.

4. Career Mastery

Q: "How much should I spend on Hosting?"

Architect Answer: "Your COGS (Cost of Goods Sold)—which includes hosting and third-party APIs—should be **less than 20% of your revenue**. If your $100/mo SaaS costs you $50/mo in Azure credits, your architecture is inefficient. As a founder, your job is to optimize your code not just for 'Speed', but for 'Profitability'."