Starting something new is always the biggest challenge, you’ve got so many different areas to brush up on, and when it comes to running a business, nothing ever goes smoothly. Your finances are one of the biggest concerns you will ever have, at any point in your business’ life. While you may look at that business plan and follow it to the T, there are going to be things that will take you off the beaten track a lot. Finances will cause a lot of considerable problems, and they can feel like an ever-mounting mountain of debt. That first 12 months proves to be troublesome, and while you may have petty issues in relation to staff, the products, and your emotions, what can you do to ensure the petty cash register is full, and you have a business that is financially afloat?
- Plan And prepare properly. Yes, it might sound very obvious, but if you don’t plan and prepare prior to unveiling the business, you will have lots of niggling problems that you will have to firefight. As a result, not only will the business suffer, but your finances will too. This is why it’s important to go back to the drawing board and develop a business plan that is solid. Amazingly, entrepreneurs view a business plan as something they use just to get on the side of the banks. A business plan is much more than that, it’s something that is a blueprint, and you should follow it to the letter. If you take the time to research and strategize effectively and implement this into a business plan that stands the test of time, it’s going to have a fantastic impact, and not just on your finances, but the whole business structure. It has a positive impact on your employees, your product, and it’s going to give you more peace of mind. Planning and preparing isn’t just something to do at the outset, you need to prepare for the worst-case scenario. The finances will always be precarious in first 12 months, and as you want your business to become financially sustainable, it’s vital to have a backup plan. Even an exit strategy is something you should consider, even though you are hoping it doesn’t come to that. Sometimes, businesses don’t take off, and as the overwhelming statistic that 8 or 9 out of 10 startups fail within the first year, it’s imperative that you have a backup plan, but also an exit strategy that is fully realized. It can be tempting to reflect back early on in the startup process. And while you are trying to find your feet, it’s better for you to aim for the goal of financial stability, and then you can look back to see what worked and what didn’t.
- Take baby steps. Slow and steady wins the race, and when you are first unveiling the business, from an entrepreneurial perspective, it’s incredibly exciting. But soon enough, there will be setbacks and problems that will take its toll. This is why it’s vital for you to set yourself small goals that are achievable. Of course, the five-year plan is always exciting, and a great thing to witness come to life, but it’s not going to happen until you sort out the smaller issues. One of the most common issues in a startup from a financial perspective is running out of money. Your overheads need to be kept to a minimum, and while it’s exciting to spend this money on new equipment, and clever tools that you hope will benefit your business, there is no evidence that it will work right now. This is why you need to have a handle on your finances, and ensure that you are doing your utmost to reduce overheads, but also research your options effectively. If you’re looking for the best business credit cards, or the cheapest asset-based lending providers, or even which parts of the business can be outsourced, these are all elements that require sufficient research and organization. Organization is something that can easily escape you, when it’s just you being in charge of every aspect of the business. If you are running a skeleton startup, you are looking to reduce overheads by keeping everything to a minimum. As a result, you need to be on top of your outgoings in an administrative sense. Of course, there are programs that benefit small businesses now, such as QuickBooks, but it’s important to develop your own system. Or if you really cannot keep track of your accounts payable and accounts receivable, you have to delegate this duty. You need to know at any one time how the business accounts are looking. It shouldn’t be something that you have to dig deep into a filing cabinet, do the necessary mathematical equations, and come up with the answer. This is why a sensible organization, or using any sort of computer program, or even have an accountant cook the books for you on a regular basis, is the most important part of looking after your funds. And at the end of the day, this is what will give you peace of mind, so you can focus better on the aspects that really deserve your attention. We can think that the financial processes are safe and secure because they are on file, or that you’ve got a manual filing system for receipts. It’s hardly ever this straightforward, there will be late payments, people who won’t pay up at all, and as a result, if you find yourself without a sense of structure when it comes to acquiring payments or purchasing supplies, you will find yourself in a veritable mess.
- Remember the customer. Cash flow is not just about the internal processes. A client base or a healthy customer base is essential. In fact, your finances depend on it in every single way. It might be obvious to say, but every customer is important, and integral to how your business progressive, especially during that first year. This is why the business plan is something that needs to be comprehensively researched. You need to contain in the business plan how you will engage with your customers and your clients. This is why research is an invaluable process beforehand, so you can tailor products towards a specific market, but also develop marketing campaigns that will target the right groups. So many startups think that it’s easy enough to get a Facebook page, or an Instagram account, or a YouTube channel. But because so many startups have limited funds, they feel that the best approach to marketing is to spread it out evenly between all platforms. This is not only counterproductive but is very unhealthy for the business. It’s far better for you to take that time to research your customers and to understand the most prominent platform they use. From there, you can drip feed an effective marketing campaign, using resources like Hootsuite. These social media tools are so important to a startup now, but you need to remember that your customers are going to be what will give you your much needed first bites of the cherry, in a financial sense.
- Reinvest back into the business. Once you’ve identified your customer base, and your product is out there, you will begin to see money coming in. The temptation at this point is to use it to pay off your existing debt, but take the opportunity to financially forecast for the next year based on what has happened up to this point. You need to think about what you can do to improve your business at this stage, and reinvesting these monies back into the company is the only way to keep the business financially afloat. It’s always tempting to pocket some of the money yourself and give you a better pay package, but what can you do to improve the products, or the marketing, or the workplace culture? Just because you’re the owner of the business doesn’t mean you are the most important person there. It’s very common for entrepreneurs to be the last person to get paid. You are putting in so much effort to ensure this startup takes off, that every other piece of the puzzle needs to be catered for first. You need to undertake a proficient assessment of your business in the round, and look at what needs improving. It could be sheer luck that you managed to get to this point, and rather than be complacent thinking the upward trend will continue, your business could easily take a nosedive. So, do your utmost to ensure that every other aspect is well catered for. If your website needs rejigging, do it. If your clients need more sweet talking, do it. You have to be the last person to get paid, and it will help you, so long as you show every other aspect of the company that you are deathly serious about ensuring its success.
Keeping your startup financially afloat is a massive task, and it’s not an easy one. Those first 12 months are where you will understand what works and what doesn’t; you will have many late nights, early mornings, and feel a sufficient amount of stress. The finances will be, undoubtedly, the root cause, but if you approach it with the right attitude, and have a few of these aspects put into place, you will not sink.
This post contains contributed content.