Top 7 Financial Tips to Sustain Startups
Financial Planning & Management is key to sustaining a startup in a highly-competitive and dynamic business environment. Lack of proper financial planning results in significant monetary losses and ultimately closing down of the business. During an adverse situation or a crisis, startups need to have a backup plan and an exit strategy to cover the losses. Therefore, Financial Management is crucial for startups to sustain and succeed in the long run. Listed below are the top financial tips for entrepreneurs to help startups survive in the long run.
1. Establishing Financial Goals:
- Startup owners need to break financial goals into reachable and measurable ones.
- Quarterly, monthly, weekly, monthly, or even daily revenue goals allow startup owners to stay on track and make necessary adjustments to sustain and grow.
2. Efficient Cash Flow Management:
- Cash Management is vital for all organizations, especially startups. Entrepreneurs must always be able to forecast the startup costs and cash flow requirements. Many a time, upfront payments would be required to facilitate business for the startup.
- Entrepreneurs must keep track of all transactions relating to cash flow and know where the cash is coming from and going. They must maintain an Expense Sheet covering all expenses toward office facilities, employee salaries, manufacturing, logistics, marketing expenses, partner channels, supplier relations, and more.
3. Monitoring Daily Spend:
- For startups, there will be expenses coming up from all directions now and then. But hiring a finance professional to track the spending and monitor expenses may not be feasible at the start. Therefore, Accounting and Budgeting software is a must for all startups to continually track and monitor daily spend.
4. Minimizing Fixed Expenses:
- In the startup's initial stages, the expenses must be limited and minimized to sustain in the long run.
- Startups should strive to cut down unnecessary expenses and operate lean to achieve financial independence.
- Startups must focus on strategies to generate revenue rather than wasting money on taking fancy amenities at the start.
5. Preparing a Contingency Plan:
- For a startup to succeed, the founders must have a solid contingency plan for debt recovery or cutting down any unexpected business losses.
- A business continuity plan is a pre-requisite for startups to sustain during adverse situations. It helps to strategize business processes and optimize resources such that the company can run profitably at all stages of its operations.
6. Customer Acquisition & Engagement:
- Without customers, there is no business. So, focusing on new customer acquisitions is critical for startups to survive. Therefore, they must focus on identifying various channels for customer acquisition.
- Engaging with customers and providing exceptional customer experience help enhance brand value. Happy and satisfied customers will eventually become brand ambassadors for the startup.
7. Mitigating the Risk:
- When market conditions become highly unpredictable, startups often have to incur losses during certain business transactions. During such times, the entrepreneur would require to put in extra efforts to sustain the startup.
- To mitigate the risk and reduce his liabilities from the company, the business owner must keep personal and company finances in distinct accounts. This separation will help him save money, diversify the investments, and secure his personal life in any adversity.
- The business owner must hold financial reserves- both personal and business - in an emergency savings account.
Proper financial planning & management is key to sustaining startups. However, access to government-supported startup funds and financial incentives at the seed level or conceptual stage can help startups to survive in the long run.
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