Having good control of your finances as a startup, and even as a seasoned businessperson, is what really translates into success. No matter what happens, you never want to be lazy in that area. Wherever you are in your finances is where you are in your business. That means a successful startup requires you to create a system for keeping track of all your income and expenses.
It also requires you to stay on top of both your tax and every financial change taking place in your sector no matter how insignificant they seem. A good financial status for a startup goes far beyond simply getting the needed capital for the business.
What we have done here is to provide tips on how startups can optimize their money intelligence to better handle their cash flow. These tips are drawn from the lessons provided by the most successful CEOs. It shows that while building a great team, making customers happy, creating a compelling product and brand are all good things, the yardstick for a successful startup, at the end of the day, is the smart money decisions the executive has been making.
Keep your budget for advertising limited
You cannot build your startup into the great brand you hope to be without the help of marketing and advertising. They are what will help you get in touch with your potential customers and turn your brand name into potentially a household name. With them, you build a reputation for your business.
However, you may be tempted to keep putting money into it as you drive towards seeing results. Investing in advertising this way can ruin your business because both marketing and advertising are huge industries and, although using them as much as possible isn’t going to hurt you, they can be very expensive and will certainly drain your finances.
Instead, set aside a budget for your advertising and marketing needs, and make sure you limit it as much as possible. The more your business grows, the more you will then expand the budget. Let your present worth inform your advertising strategy and consequently the resources you pump into it, as it always takes as much as you are willing to give. To make it easier, pay less attention to competition as that is what leads most startups to overspend on advertising.
Identify your specific risks
Being able to identify specific risks will save you a lot of time and money. Most CEOs that are new to the game find this difficult to do. Once they learn to vet the common risks most businesses experience, they assume they are covered. Every business has its unique risks, especially in the first five years. Technology-based startups usually face the possibility of the product not working as anticipated. Social media platforms like Twitter and Facebook found it difficult to monetize their platforms, meaning they would be valued lower, which goes on to affect their finances.
Also, understanding your specific risks ensures you are proactive and budget for them. Careless spending, even when it seems needed, is one of the easiest ways to fatally wound a startup even before it takes off.
Establish clear goals
Setting clear goals is key and you need to learn it and internalize it. It is okay to set yearly goals and also good to have quarterly goals both clearly mapped out. It should contain all you hope to achieve and within a particular time frame. Not only that, every member of your team needs to be acquainted with these goals alongside the strategies set out to achieve them. Working with a content writer and a copywriter also helps since they can draft them better in clear language using your brief. Avoid either setting low goals or goals that are impossible to achieve, especially within a certain timeframe, for yourself. Ensure they are realistic.
Get help managing money
No matter how much you try, you could always do with the help of a professional. With how important it is to have your finances in order, it is not too much trouble to get extra help. Creating the founding idea of your business doesn’t automatically make you an expert in managing money, which should take up to 80% of your time. However, most startup founders don’t know this. So, they go ahead and manage the tracking and handling of money themselves.
Instead of taking up the daunting job of managing your company’s finances and leaving little time for you to handle the proper management of your business, you can either hire an accountant or a CFO who will be in charge of that. This way, you channel all your time and creativity into running the rest of your startup.
Make good use of tech
Managing your money is much easier when you hire smart and get into tech too. Using spreadsheets to monitor your income and expenses may serve you well for the first year but it won’t do an efficient job long term. More so, you need technical support in managing your money since it is more secure that way.
Investing in tech provides you with many unique options for managing your money with additional security. Growing with tech support will help you store the data you might need in the future to make better financial decisions. Also, once your business takes off and you hopefully begin building branches in other countries, you would need to deal in other currencies and with complex financial data
Make the most of your time
Time is money. All of your work hours should be devoted to building your business up. You will have many distractions both from within and outside your company. The easiest way to overcome them is to have a clear schedule and follow it religiously. Meetings should be brief and to the point. Part of making the most of your time is understanding yourself and when you are at your sharpest. Schedule the most difficult tasks to when you are most mentally sharp too.
Exercise patience a lot
When it comes to dealing with money, you have to be patient. Make sure you have your safety net perfectly secured as you are working with external finance. Your safety net should be able to carry you for at least 3 years into the business. Grow with your finances. This means that, at the beginning stage, spend only on what is absolutely necessary. With this patience, you will grow faster and will be able to afford everything you dream of having your business in.
Better to avoid higher valuation
One of the things you have to watch out for as a startup is a down round. The easiest way to go down that slope is through unreachable high valuation. If you raise money this way, you will be pressured unnecessarily to meet up. The need to meet up will lead to rash decisions aimed at making immediate profits. One of the negative impacts of such high valuation is the reputation it brings your business when you have to raise money again. It is better, sometimes, to do so at a lower valuation.
Thorough and strategic planning with proper financial management will take your company to a great height. The secret to success as a startup owner isn’t in how much money you are able to raise. Given the right opportunity, anyone can do that. It is in proper money management.