Starting a new entrepreneurial venture is no mean feat. It is a tough, yet exhilarating experience. It can prove to be highly rewarding and enriching if properly managed. For any business, small, large, new or established, financial management is crucial to healthy growth.
In the case of startups, financial planning and management is even more vital for success as these business need capital to establish themselves and have little capability of sustaining losses. Here are some tips for budding entrepreneurs and startups
Manage cashflow minutely
Cash or in more general terms money is the foundation of any business. Therefore it is important to ensure that your accounting is immaculate. A chief cause of failure if startups are the ill management and the subsequent lack of cash. It is recommended that you make an exhaustive budget for a fixed time period. It is also essential that you leave some elbow room in this budget, to account for any surprise expenses that might occur. Invest time in preparing plans for money management. Also make sure to track every bit of your money, where it is coming from and where it is going.
Monitor and record all expenses
A budding startup incurs innumerable expenses, from office stationery to employee salaries and benefits. It is necessary o keep expenses in control if your venture is to succeed. A way to effectively manage your accounts is to make note of every expenditure, however small it may seem. This shows you trends in the expenses and allows you to cut corners wherever necessary.
You may want to initially invest in a cloud based accounting software, a professional may prove a little out of your budget. Only when the accounting gets too complex should you hire a professional.
Prepare for the worst-case scenario
You may be jacked up to give your everything to your startup. However, things do not always go favorably. It is always advisable to have more than one backup plan for all kinds of scenarios.
Most startups face a lack of cash, a problem that is difficult to go around. Therefore it is always a good idea to keep substantial reserves in a liquid form. This helps you sail through most problems easily. Even so, prepare for the worst-case scenario of failure, and keep a reliable income source within your grasp. It is also a good idea to invest some of your liquid cash in long term bonds, which may serve as a backup for your future plans.
Manage time extremely well
Time management is the key to success in today’s world, regardless of the field occupation or any other circumstance. For an entrepreneur of any stature, time management is highly crucial. You must always ensure that you are getting. Maximum possible productivity out of your time, for, every minute wasted, costs you money. Therefore, the value of time couldn’t be stressed enough for a budding startup.
Also Read- Time Management Software
Increase your customer base
Customers are your means to achieve your goals and targets. Therefore, you should focus on acquiring customers, and keeping them. Both of these activities are equally important. You can use various marketing channels such as mailing lists, social network marketing, digital marketing campaigns to attract new customers to your business. More the number of customers more is the stability of your business.It is equally important to keep your existing customers loyal to your business. This can be achieved by ensuring quality services, support, and good customer experience.
A wide customer network is of huge help. The word of mouth is perhaps a more effective mode of marketing than most other means. This automatically helps you acquire new customers, which in turn increases your income, leading to greater stability.
Allocate maximum capital to growth
It is important to keep your budget focussed on the correct areas. For example, staff parties, posh office spaces, etc., should not be at the top of your expenditure. You must focus on the growth of your business and allocate maximum funds to it. For example, to increase your sales, you must allocate funds for your marketingcampaigns. This may include expenses on software that facilitate online marketing. This is another reason for the failure of startups; the fact that they give importance to trivial things.
Keep your accounts transparent
For optimal growth of your business, outside investment is necessary. Therefore it is important ot attract investors, venture capitalists, etc. A great way to gain the confidence of investors is to ensure that your books are transparent. Any shady dealings on your books and investors hesitate to trust you and your business suffers as a result.
Set a series of achievable financial targets
Rome was not built in a day. Similarly, your budding startup will not turn into a multi-million dollar company just because you want it to. It is advisable to follow a financial target oriented approach. You should set weekly, monthly and quarterly financial targets and work towards them. Most importantly these targets should be achievable, yet must not be too easy to reach.This way, you get the confidence and the motivation to keep up your work. It also leads to steady progress towards your bigger milestones.
Entrepreneurship is a highly rewarding journey but is filled with obstacles. Startups specifically face many problems related to finances and fiscal management. The above tips can definitely help in circumventing most financial troubles faced by startups. However, it is recommended that you consult a financial consultant and a lawyer before taking any major decision.