Launching new ventures is exciting and risky. Start-ups offer great opportunity but are known for being volatile, instable and frequently failing. Maintaining your financial equilibrium is one of the key elements that can ensure that your start-up is around long enough to thrive and achieve everything that you dream for it.
The first order of business is to wait. Don’t launch too soon. You need to accumulate capital before launching. That might mean continuing in your existing career, soliciting investors, loans or grants, or working a second job on the side even after you launch.
A word of caution: be clear when you allocate these funds to the business. You need clarity between what is yours as an individual and what belongs to the business.
Business Plans
Another early-stage component is having a detailed plan with realistic expectations, contingencies and risk assessments. Many founders are caught off guard by the real costs of doing business, unexpected changes and charges as they go along, and inadequate funding.
Don’t forget to stay ahead of finances, literally. Plan months into the future, and seek out funding well in advance of when you’ll need it or you’ll risk getting behind.
If you’ve already launched your start-up, then you’ve missed the window to be truly prepared and you’ll have to hustle to get ahead of your finances after the fact. However, it’s never too late to get started. Get your detailed business plan together, using real experience and costs that the business has already faced to make it even more accurate. Seek out sources of funding, including unconventional ones.
There can be lost or misallocated funds, even very early on in a start-up. Often, the fast pace and pressure to succeed can result in oversights and a lack of attention to detail. Collect on payments owed as early as possible for maximum benefit. Keep an eye on outgoing payments. Financial institutions do make mistakes, and you may be overpaying or paying for things that you didn’t need or benefit from. Learn how to claim PPI. Payment protection insurance (PPI) was overcharged in many cases and may be eligible to reclaim.
Limiting unnecessary payments and reclaiming mistaken charges is a practical way to reduce costs and ensure a balanced financial standing.
Minimum Viable Products or Services
Ship minimum viable products or services. This start-up principle often goes hand in hand with bootstrapping your business, which is when you reinvest income to continue growing. The idea is to start bringing in income as early as possible and without racking up too much debt. Start-ups often struggle to become profitable, and in the early days, you will likely find that your expenses outweigh your income, but don’t fall prey to the temptation to pursue the perfect product or service.
Quality and customer satisfaction matter, but you don’t have a business if you don’t have something to sell. Don’t oversell by keeping expectations in line with what you can sell today, but don’t hold off on selling anything because you know that you can achieve a better product. The duration of your business experience will probably be in pursuit of ever better product offerings. Get started as soon as possible with something that helps people, meets a need, or is valuable to your customer.
While pursuing outside funding is necessary for most start-ups, it’s by no means the only approach to doing business. Many start-ups are focused on remarkable growth targets, and while ambition is good, it can get in the way of practical decision-making.
Many businesses in the past started with moderate seed funds and grew in a slower, more sustainable way, maintaining profitability, if at a modest scale, throughout their growth trajectory. Consider if it would be healthier for you, your staff, your business reputation and longevity, and your finances to start smaller, ship faster and grow more slowly. Another consideration is a loss of control if you involve too much outside investment.
Control Spending
Another important caution for start-ups is to curb overspending, period. There are many wonderful things to spend money on, and most of them have some value to you. Hone your talent in the art of the deal, negotiating and critical decision-making to reduce unnecessary expenditures. Ask yourself if a necessary expense can be put off for a time, and set a manageable budget to guide your decision-making. You can’t say yes to everything. Use your business plan, vision and goals to guide the tough decisions of where to spend and where to wait.
Financial advice for start-ups tends to either overemphasise outside investment or bootstrapping. The right balance for your business might not look the same as for the next business down the road. Make detailed plans, set goals, and be realistic to keep your finances in order and help your start-up thrive.