Question

FlyHigh Tech, an early-stage startup, reports to its investors using a balanced scorecard that is prepared at the end of each quarter. During the first and second quarters of the current year, the company had the following results:

	Quarter 1				Quarter 2
During the quarter:
Revenue	$	150,000			$	180,000
Cost of goods sold		100,000				125,000
Sales and marketing costs		50,000				63,000
General and administrative costs		100,000				110,000
Total market revenue		5,000,000				4,500,000
At the end of the quarter:
Cash	$	2,750,000			$	2,450,000
Number of revenue-generating customers		6,000				7,500
Number of employees		10				15

The following additional information is available:

• All jobs were filled as of the end of each quarter, and during the second quarter of the year FlyHigh hired seven new employees.
• Ten percent of customers from quarter one were lost during the second quarter, however the company increased sales and marketing expenditures by over 20 percent, resulting in a net gain in customers for the quarter.

Required:
Compute the following measures that are included in FlyHigh Tech’s second quarter balanced scorecard: (Round "Cash runway" answer to 1 decimal place.)

Required: Compute the following measures that are included in FlyHigh Tech's second quarter balanced Scorecard: (Round "Cash runway" answer to 1 decimal place.) Balanced Scorecard per month months 1. Cash burn rate 2. Cash runway 3. Churn rate 4. Market share 5. Customer acquisition cost 6. Employee turnover rate per customer

Answer 1

Cash burn rate = [ Starting  cash balance - ending  cash balance ] / Number of months

Cash burn rate = [ $ 2,750,000 - $ 2,450,000] / 3 = $ 100,000

Cash runway = Total cash reserve / Burn rate = $ 2,450,000/ $ 100,000 = 24.5 months

Churn rate = customers lost during 2nd quarter / [ Customers at the beginning + new customers during the period ]

Churn rate = 6,000 X 10%/ [ 6,000 + 1,500] = 0.08 or 8% ( i.e 0.08 X 100%)

Churn rate = 6,000 X 10% / [{6,000 - 600 }+ 2,100] = 0.08 or 8%

Market shares = [ firms sales / Total market revenues ] X 100%

Market shares = [$ 180,000/ $ 4,500,000] X 100% = 4%

Customer acquired cost = cost developed to acquire new customers / number of new customers

Customer acquisition cost per customer = [$ 63,000 - $ 50,000 ] / 7,500 - ( 6,000 - 600)

Customer acquisition cost per customer = $ 13,000 / 2,100 = $ 6.19

Employee turn over rate = [Employees who left / average employees ] X 100%

Employees left = Beginning no of employees + new recruited employees - ending no of employees

Employees left = 10 + 7 - 15 = 2

Average employees = [10 + 15] / 2 = 12.5

Employee turn over ratio = [2/ 12.5] X 100% = 16%