So, you’re thinking about heading down the path of entrepreneurship and finally launching your startup. Launching your own startup can be a very fulfilling and rewarding if executed properly.
It’s easy to have a great idea and imagine all the possibilities that the future holds. However, what’s more important than the future is making sure you’re taking every measure to set yourself up for success. There are many moving parts that make up a successful startup, and you’ll want to go in with as much insight and information as you can.
Financial management for startups can make or break your entire strategy. If you’re wondering “what is a startup budget” or clueless about what financial tips you should know about, here are some financial advice for startups that you should consider before launching:
Watch Your Expenses
Obviously, you’d want expenses to be low in general, but it’s crucial in the early days of your startup to ensure your business will be successful long-term. Keep materialistic things to a minimum.
Maybe you’ve been dreaming of setting up shop in that new high-rise downtown, or of catering lunches every day for your new team. These things may be feasible in the future, but in the beginning, keep expenditures low.
Consider having you and your team working remotely for a while – it’s becoming increasingly popular and can really help keep your early overhead low. This will enable you to allocate most of your capital to further grow your business. Many startups place too much emphasis on image and employment perks in the beginning and it can really slow down their success in the long run.
Having said that, there are certain things that desirable but not needed; while others are absolutely crucial. For example, deciding your brand elements and direction is crucial right from the start. This isn’t something you’d want to save on. If you get it wrong, it could have dire consequences down the road – you’d find that it’s a lot harder to change your brand.
Give Yourself a Reasonable Salary
It might seem like the best thing to do with that hard-earned revenue is to put it all back into the business, but don’t neglect your own financial comfort and stability.
You need to pay yourself enough to survive on. Living comfortably and not having to stress about your own finances will allow to bring your best self to the office every day and become more focused on growing your young business.
Aside from living comfortably and reducing stress, paying yourself reasonably can also be helpful for tax purposes. Consider determining a certain percentage of your revenue to pay to yourself. You can then decide what to keep in your business checking and business savings.
Set Boundaries Between Personal and Business Finances
This is so important and can be difficult to implement if you aren’t serious about it from the beginning. It’s also another reason why giving yourself a decent salary is so important – you don’t want to be dipping into your company’s money to buy groceries.
Make this easier on yourself by setting up a business checking account from the very start. That way, there will be a clearly defined line of what money is for the business and what money is yours to spend. If you are putting your own personal money into the business or covering any expenses on your own, transfer that money into your business checking account.
Track Your Cash Flow
One of the many mistakes made by new startup owners is not keeping track of their cash flow. This can lead to your worst nightmare coming true: running out of money. So, you will want to know exactly where every bit of money is coming from and where it’s going to.
Set a strict budget and start thoroughly logging your expenses early on. You can do this very easily by using a spreadsheet program such as Microsoft Excel and record everything on a regular basis.
You can determine a schedule that works best for you, whether you decide to log in data on a daily or weekly basis. Knowing where your money is moving to and from will give you peace of mind and let you know quickly when any discrepancies come along.
Start with a Small Team
Managing your resources responsibly from the beginning is vital. Some startups may be a bit more complex than others and require more manpower, but the smaller the team you can start with, the fewer people you will have to pay.
Consider which people will be most needed and valuable to you for your launch. You’ll want to have the team necessary to make things possible and run smoothly. You can always hire more people in the future once the demand for your business is higher and you have enough revenue coming in to pay more salaries.
Your Time is Your Money
Even with all of your newfound freedom that comes with working for yourself, you still need to establish some type of personal schedule. Make sure that you are getting done what needs to be done daily, and not putting it off to do another time.
Especially when your business is young and your employee count is low, every minute not spent working on something business-related is costing you money. Stay disciplined and understand the value of your time and effort.
Set Realistic, Attainable Financial Goals
It is easy to start dreaming of your millions from the beginning, but what’s going to be most rewarding and gratifying is reaching realistic and measurable goals.
It’s easiest to track the growth of your business through daily, weekly, or monthly revenue goals. Seeing this constant growth and small wins will keep your confidence and motivation up.
Determine a larger milestone you’d like to reach in the next six months or year, and divide it into smaller checkpoints that you can meet and that are reachable.
Launching your startup is a truly exciting time. With so much to think about and to get ready for, it’s common for some new business owners to make really detrimental mistakes on the financial front. Financial management for startups is something you don’t want to neglect.
Consider our advice for startups to help you start strong, and watch your business grow from there. If you make sure to do everything possible to set yourself and your business up properly in the beginning, you’re sure to have a successful and prosperous future ahead.