To develop a successful startup a lot of things need to be considered. A great idea will only take you so far before you run into other issues. One of the biggest challenges that new startups and entrepreneurs face is financial planning and management.
A proper understanding and handling of business finances is key in a highly competitive and dynamic business environment. Lack of financial planning can result in significant monetary losses and ultimately close down your business.
Moreover, financial management is crucial for sustainable growth in the long term. An incorrect or insufficient approach to financial management can prevent the full potential growth of the business. For the reasons mentioned above, we will be looking into nine financial management tips for your new million-dollar business.
1. Establishing Financial Goals
Startup owners need to identify their financial goals, and articulate them into reachable and measurable goals. Financial goals must be set for the short and long term.
Having only monthly or quarterly financial goals might prevent reaching the initial future goal that the company was established to achieve.
Having a reachable long-term goal will help to keep the company’s operations on track and will help to sustain growth in the right direction.
2. Efficient Cash Flow Management
Money might be the most important factor for a new startup. Knowing where your cash is going to and coming from can help you maintain a forecast of future cash flows.
Many times startups require upfront payments to facilitate their business operations. The management of these upfront expenses is vital to keeping your business alive for as long as you can before obtaining sustainable revenue.
Having up-to-date expense and revenue sheets covering all sectors of your business like salaries, logistics, marketing, and many others will help your business to operate efficiently today and in the future.
3. Prepare a Contingency Plan:
There is a reason why the saying “always prepare for the worst” is suitable for startups. Founders must have a contingency plan for unexpected events like adverse situations, debt recovery, huge losses, and more.
A wise person once said, show me your bank statements for the last 6 months and I will tell you what you value, and this applies to business as well. While your business financial goals will show you your mission, the contingency plan will help you to strategize your business operations and resources accordingly to run profitably at all stages.
4. Customer Acquisition
Without customers, there is no business. So focusing on new customer acquisitions is critical for startups to survive. It is important to focus on identifying various channels for customer acquisition.
Engaging with customers and providing an exceptional customer experience help enhance the brand’s value. Happy and satisfied customers will eventually become brand ambassadors for the startup.
Startups must focus on new customer acquisition from day one to survive, even if It means knocking on doors and giving your best sales pitch.
Identifying different channels and providing customer experience will help to sustain your business for the long term as well as enhance the brand value. You will never know, some customers might become your company’s ambassadors.
5. Mitigate Risk
When market conditions become unpredictable, startups often incur losses on their business processes. In unprecedented times like these, startup founders need to put more focus and effort into reducing the potential risks and liabilities. Also, it is advisable to hold financial reserves to help wait out and survive tough times.
6. Form Strong Relationships
Strong connections can go a long way. Develop strong relationships with your suppliers, employees, accountants, and others. These are the people that will help, support, and guide you and your business from the first stages.
Keeping your business afloat needs not only customers but also great relationships that enhance and fulfill your business potential. Without strong relationships, your idea might just fall flat.
Moreover, be sure not to hesitate in asking for advice or help. Sometimes, by asking you can gain more than what you were initially looking for.
7. Outsource Tasks When Necessary
Initially, when starting your start-up, you might be a two or one-man team. You will find yourself doing most of the work from marketing and sales to accounting, design, and more.
However, as your business grows, you will not find time to do everything yourself. You need to identify which tasks are taking your precious time but can be outsourced. For example, if you don’t know how to design a logo or marketing content, then it would be much easier and efficient to hire an expert in the field.
When outsourcing, you will be saving your time, as you don’t have to learn photoshop or any other software. Additionally, you will be getting much better results from the expert.
Yes, outsourcing will cost money, but the result is much more satisfactory. By using an expert you will be getting a return on your investment, as they bring more value to your business.
8. Re-evaluate Your Position
Remember the tip about establishing financial goals? Re-evaluating your position and adjusting your goals is an addition to that.
Many start-ups forget to review their position after a year or two. By that time many things like technology, market trends, political tensions, might have changed. Understanding your position in a changing environment will help to adjust your strategy and succeed in the long run.
9. “Look Good”
The success of your business will attract not only new customers but also investors. Investors can be a great addition to your company as they provide financial resources, guidance, expertise, and connections.
However, to attract investors you won’t need just a good idea but also a good credit score. The relationships that you have with suppliers and other partners are determined by the financial history and worthiness. Maintaining a healthy relationship will establish goodwill for your start-up.
While developing and sustaining a startup will take much effort and time, it is important to remember the goal you are trying to achieve. There isn’t one right way to deal with financial planning and management.
Some tips will help you and some won’t. However, the goal is to initiate action, and the right solution will come. Keep an eye on the bigger picture and be flexible. Last but not least, as the saying goes “don’t judge each day by the harvest you reap but by the seeds that you plant”.