Financial Tips That Every Single Startup Entrepreneur Needs To Know

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One of the biggest problems that people have when they launch a company is not controlling finances properly. A new entrepreneur will face various difficulties. Proper planning is always necessary to guarantee success. This means that you need to know all that you can about managing finances. Here are a few financial tips that every single startup entrepreneur needs to know...


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Time Is Money!

This might seem like a cliché but we need to always think about the time that is dedicated to every single activity we do. This includes meetings, travelling, planning and so on. You need to take your priorities into account and dedicate as much time as you can towards growing your business. As you grow and you are sure that finances are strong, you can take more time off.

Always Plan With The Worst Case Scenario In Mind

One of the best ways to avoid financial disasters is to actually be prepared for them. When you do not take into account the possibility that your startup will go through various difficulties, it is guaranteed that you will not have the necessary finances to cope with them when they appear.

It is highly recommended that you start your startup adventure only when you have finances to cover everything for a minimum of 3 months. This includes both living expenses and company expenses. If you can, having everything covered for the first 6 months is recommended.


Recommended reading: 6 Tips on Small Business Finance


Track How Much You Spend

One of the biggest problems money-wise when you start your business is improper tracking of expenditure. Then tax time hits and it can take many hours trying to sort out what you have spent and where. Keep track of expenditures, keep all receipts (!) and if at any point in time you feel like you are losing control of how much you spend and how much revenue is coming in, make sure that you talk to a professional. Information does get more complicated in time so an accountant will be necessary. Plan for that in advance!

Improper Cash Flow Management

Company failures often come down to one main reason. They run out of cash. When you run out of cash, you cannot control anything since suppliers want money from you and they will start to pressure you.

The most important financial metric to consider is cash flow. Any startup manager has to know where the cash comes from and where it will go at all times. This means that budgeting is vital and once you create your budget, you have to respect it.

Everything Starts With The First Customer

You cannot actually say that you are in business if there are no customers. You need to figure out who is going to buy your service or product, what their profile is, where they spend time, how they buy etc. At the same time, you need to understand why your product or service would not be bought - what would stop people buying it? If you understand these two things, you will be able to increase the possibility of getting your first customer. As soon as you get your first customer, make sure that you work with him or her so that you can obtain feedback. Feedback helps you improve as well as giving you a reference and testimonial. 

Control Your Fixed Expenses

In fact, try to keep them as low as possible. As a very simple example, you should never rent something in the middle of the city when you can find something suitable in another location, at a lower price tag. When you minimise monthly fixed expenses, it is a lot easier to control overhead. 

Look at month-to-month options that you could take advantage of. Consider what you can write off on your taxes and you will save valuable cash. This is where working with an accountant can repay their fee quickly, as they will help you work out what's best. 


Recommended reading: The Importance of a Financial Plan for a Small Business


Never Lie To Your Investors Or Lenders

Being honest with lenders and investors can actually bring in more money when it is necessary. Saying that everything is fine when the exact opposite is correct will land you into a world of problems.

Conclusion

You can more easily control everything if you track your finances well, keep good records and plan ahead. As the old saying goes, "Failing to plan means planning to fail". 

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