Financial Tips for Start-Up Founders

Running a start-up business is notoriously difficult, risky and thrilling. Your hard work goes towards all areas of your fledgling business’ health – but your personal finances take a hit when your baby company experiences difficulties before its full maturation into the market. As such, those who start new businesses (whether experienced entrepreneurs or first-timers) need a certain amount of financial common-sense and planning capabilities on their side in order to navigate the tumultuous waters of start-up management. This article is all about those skills, providing the tips you’ll need to make a success of your start-up venture.

Understand Cash Flow

However you’re choosing to fund your business, understanding the cash flow of your business should be your very first port of call when founding a start-up. If you’re an experienced financial number-cruncher yourself, it’s time to make some sensible predictions of costs and profits in an excel spreadsheet that determines the financial viability of your project. If you’re not all that good with financial forecasting, it’s imperative that you look to the skills of a specialist – whether inside your network or from an agency –to understand the risks you’ll be taking by starting up your company.

With this initial estimate of your cash flow, that is, what you’ll be spending and investing each month, and what you’ll be earning, you should be able to make a financial plan that is relatively watertight. If your actual finances ever deviate from your first model, you’ll be able to make alterations to your forecast that will give you responsive and up-to-date numbers concerning your cash flow. This is vitally important for businesses that are keen to avoid the financial mishaps that can damage the most promising of start-ups.

Hire Wisely

You are certainly going to need some hired help to make your startup a success. No startup business can be entirely run and managed by one individual, and so you’re going to need to start looking at the employment market to select the very best individuals to work with to help you realize your dream. Remember that a serious expense that you’re likely to incur in your startup development is the wages you pay your staff. In order to extract the best value from that investment, you’re going to want the brightest, best and most dedicated personnel working under you.

But how do you find such individuals? As always, the best place to start is within your own network. Here, you’ll be able to scour your LinkedIn account or those old friends who’ve got the experience to help you. If your network doesn’t return any promising lead, there’s also the possibility of leveraging an HR company or a recruiter to do the heavy lifting for you delivering the best candidates to your door for the final interview after they themselves have been vetted by the recruiter. Meanwhile, the traditional job advert can attract huge interest if composed well, so it’s always worth placing one on the most significant job ad sites, too.

In general, it’s fair to say that start-ups don’t operate with a reliable level of economic certainty. In fact, their youth means that their trade can vary wildly month to month, which means even the best-laid financial forecasts can go amiss in months where your marketing campaigns haven’t quite come off, or when you’ve been unable to meet the number of orders placed. In these challenging times, it’s crucial to have a back-up that’ll allow you to safely access a loan in order to help you out of sticky and potentially disastrous situations for your start-up company.

Short-term loans are one way out. These will avoid you dipping too heavily into your personal finances. Business loans are extremely common and are granted for a number of reasons – and if that’s the path that you wish to go, you should contact your bank to understand the processes involved. You can find loans with bad credit, too, which means that even if you’re worried that your credit rating is too poor to secure your desired loan, you’ll be able to find professional companies to service your loan requirements.

Financial Advice

Pride comes before a fall. That’s a piece of advice that experienced business leaders always deliver to excited and energetic start-up founders who are gearing up for a bright and exciting financial future. The truth is that an added perspective – from a professional with a long history of experience – can really help temper your financial forecasts and cast light on your biases in a way that nothing else can.

Bringing a financial advisor on board, either as a CFO or simply to help you on a freelance basis, can help you formulate more mature and realistic business plans that are based in cold hard fact as opposed to subjective supposition. If you’re serious about the success of your start-up, it’s important therefore that you look to outside helpers to check your economic modeling, your accounts, and your forecasts. Their second opinion can be utterly invaluable in helping you and your business towards success.

Investment

The oxygen that fuels startup businesses are provided by that old reliable source; continued investment. Without reinvestment of your profits in your company’s growth, you’ll find that your start-up briefly shines before collapsing back into the scrapheap of the market. To really take advantage of your company’s initial business, you need to seize your opportunity and spend money to secure further business and that means investing more cash into growth, whether that’s in automation, staff, infrastructure or other business processes.

Meanwhile, on the other hand, you don’t want to invest too much into your company. Attempting to scale too quickly can have disastrous effects for start-up businesses who aren’t guaranteed to profit from that scaling. You need to choose the right time to scale, and be patient until there are sure signs that your scaling will enable you to capture another share of your given market, driving your startup to more success in the long run.

This article offers financial tips to start-up founders in the hope that the decisions they make will be more mature, thought-through and well-timed after having read through this article.