“Burn Rate”:  Financial Expression of the Day

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There’s only one burn rate that the i-banker cares about: his own.

Burn rate,noun phrase, the speed at which a company consumes cash.  Usage note:  Investment bankers, particularly those who advise money-losing internet companies, love this expression.  After having wrapped up a meeting with the “deal team” and instructed his minions to redo the entire 90-page pitchbook (with the client meeting slated for 9 AM the next morning), the i-banker might kick back in his corner office and enjoy a brief breeze-shooting session with the senior vice president on the project, who’s a great audience for the MD because the former will laugh at all the MD’s stupid jokes.  There the senior i-banker will sit, tasseled loafers up on the desk, quite possibly spinning his Mont Blanc pen around his thumb (many a banker prides himself on pen-spinning ability because he ludicrously thinks it adds some sort of jock street cred to his awkward and totally unathletic body language), while saying something like, “With a burn rate like that, they might not make it through the end of the year.  Have the analyst run the model again.”  There’s a good chance that the MD couldn’t run the model if his bonus depended on it, so he’ll keep his instructions very “big picture.

An Investment banker in pursuit of a fee will say just about anything to close a deal.  And that’s because there’s only one burn rate that the MD really cares about:  his own.  Although a senior banker makes more in salary than those lower on the totem pole, more than twice his salary will come in the form of bonus.  Unfortunately, these days, a lot of that bonus is not only deferred stock but also deferred cash.  So by summertime, halfway through the financial year, when it’s not clear how the bonus pool will look at year-end and the MD is discussing a client’s burn-rate with bank lenders, he’ll be thinking about another kind of burn rate:  “Let’s see, the Hamptons house is 30 grand a friggin month, tennis camp and lessons for the kids are another 5 grand, that Rolex cost me 7 grand, then tuition in the fall, Jesus Christ…I better tell these stupid lenders that my client will be free cash flow positive next month.”

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One thought on ““Burn Rate”:  Financial Expression of the Day

  1. Pingback: “Delta”: Financial Expression of the Day | Bud Fox News

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