Having a financial plan is just as important as having a business plan when getting a startup going.
This is especially true for the early stages of running a business – you need some time to learn the ropes of entrepreneurship, and thinking on your feet about the finances is definitely not a good idea. Money management is a large concern for a reason – it is not easy, especially in the harsh world of business, so here are some tips on making the most of your finance strategy in the coming year.
Be wary of overinvesting: Spending too much money on a business in its early stages isn’t a real option; in truth, you can never invest too much into getting a business going. After reaching success, however, many business owners decide to expand their capacities, and this requires increased investing.
Of course, this is often a fantastic business move which can lead to business expansion and increased automation.
On the other hand, it can also lead to overexpansion and decreased automation, owing to the fact that business growth has increased hiring as a consequence, which further leads to potential loss of control. A premature expansion can, in fact, be your up-until-then successful business’s demise! This is where outsourcing can help you – hiring freelancers and remote workers is a much simpler process than hiring employees that you can’t just blatantly break the contract with. Outsource strategically.
Scale it down: More often, however, entrepreneurs struggle even before extensive growth becomes a potential issue. There are people who dream big because that seems like the only way to reach their actual dreams. Sure, having a vision is one of the prime qualities a successful entrepreneur has to possess in order to reach success, but you shouldn’t be afraid of adjusting your idea.
When things start getting risky, some would advise working on your short-term objectives instead of adjusting your end-goal, and this is all absolutely fine and logical; however, when things start getting really risky, downscaling becomes a legitimate option. When your company is struggling to remain afloat, taking your end-goals down a notch is always a better idea than focusing on short-term objectives that can easily backfire and actually kill your business. This is always a preferable choice both financially and in terms of future business potential.
Always have a backup plan: Everyone knows that the world of business is very risky. In fact, the vast majority of startups actually result in failure at some point, not because they were ill-minded, but because no one can predict instant success.
Even a minor setback can cause your business’s demise and there is little you can do about it, let alone predicting it. The only thing you can do is being ready for the risks. By “being ready for the risks” we mean having a backup plan to fall back on. A true entrepreneur doesn’t put all of their eggs in a single basket – they invest their eggs into a backup basket as well.
Cash flow monitoring: The vast majority of online finance tutorials never fail to include cash flow as a huge factor, and they are absolutely right! Cash flow monitoring is particularly vital during the early stages of running a startup, the most vital issues here being generating profit while retaining your customer base, because you’ll have to also manage your cash flow on the go.
Generating profit might seem like a pretty basic part of running a business, but when you consider the fact that your business might not become self-sustainable before the first two years have passed, you can get the picture of all the potential problems you might end up facing. There are means of finding a way to make maintaining a healthy flow of working capital less stressful and easier for you, ranging from private capital investments to selling your invoices.
Use technology: The 21st century has gifted us with awesome technological wonders – nowadays, there’s an app for almost everything. This can easily be taken advantage of and it can help you run your finances more efficiently than ever. Some apps specialize in startup finances and can help you directly, but this is only scratching the surface of the huge asset that modern technology is. There are many creative ways that can be of tremendous help with your finances. For example, a simple travel app can help you plan your business trip and save money in the process, which can directly reflect upon the financial aspect of your business.
Make no mistake; managing a startup’s finances is never easy, especially in its early stages. As a matter of fact, the only thing you can do is make it less nerve-wracking by seizing as much control as you can. Be careful with your investments, don’t be afraid to scale your end-goals down, come up with a backup plan that you can always fall back on, pay special attention to your cash flow and make the most of modern technology.
About the author: David Webb is a Sydney-based business consultant, online marketing analyst and a writer. With six years of experience and a degree in business management, he continuously informs the public about the latest trends in the industry. He is a regular author at BizzmarkBlog. You can reach him on Twitter or Facebook.