It's a sad fact that many start ups fail; less than half manage to successfully weather their first five years.
Two vital financial areas that start ups need to watch constantly is how much cash they have available at any one time, and their monthly expenditure rate. Failure to budget properly can have dire consequences. Falling into financial pitfalls when investors are involved, can get a bit, well, messy, to say the least.
With that in mind, here are a number of ways in which start ups can flourish by using their money wisely.
Start off small
From mighty oaks, little acorns grow. By choosing to start off small, it will equip you over time with the skills and funds to gradually increase your goals and ultimately bring you more customers.
By holding back and limiting your initial outlay, you can gradually increase your spend and invest in product development or the equipment that will allow your business to grow. Doing so in incremental steps allows you to assess the effectiveness of each stage before you invest more money into the business.
Rent budget-friendly offices and equipment
It might sound obvious, but you really don't need fancy premises in order to succeed in your start up venture. Too many young companies fall into this trap. While you want comfortable and appropriate furniture, this can be easily achieved without rinsing the company credit card purchasing high-end desks and artwork for your new workspace.
Consider purchasing second-hand furniture and equipment to cut costs. Just make sure you don't cut costs in the wrong places. It's worth investing in quality heating and parts such as Trade Radiators, because running and repair costs can quickly spiral. Your employees will not thank you for a cold workplace with temperamental heating - it's a sure-fire way to knock productivity!
It's not always possible to find the perfect talent for your new venture in your local area, and that's ok. Outsourcing - where you pay another business or individual to perform tasks for you - is an excellent alternative.
The joy of doing this is it can be a much cheaper option than hiring staff yourself. Reputable businesses will have an abundance of talent that can help you out until you are ready to begin the hiring process yourself.
Avoid expensive computer packages
Although a start up is unlikely to have a vast number of staff, providing everyone with access to Microsoft Office can soon add up. Consider installing Office on a number of shared devices and using free alternatives such as Google Docs. It can be just as effective in the early days of your business.
Another interesting option is to avoid using an exchange server. You could use Google-hosted email instead. Why? Well, it's insanely cheap (and sometimes free), so the company wallet will most definitely thank you for it. However, bear in mind the impression a free email might create.
Keep an eye on cash flow
Lastly, but most importantly, track your cash flow from day one. If you don't, you're likely to haemorrhage money. Remember, the main reason that young businesses fail is because they run out of cash.
Using a cash flow statement is ultimately one of the best ways for you to monitor your cash flow and performance. Review it on a monthly basis, and assess your annual performance against targets too, so you'll be in no doubt as to your business' financial health. You will need the company's financial data to see where your money is currently invested, where and when it's going, and whether you'll have enough to cover all your expenditures.
There's no doubt that the current market makes for a deeply worrying time for all businesses, especially start ups. However, by taking a step back and thinking more deeply about the impact of your money, and how you spend it, you are providing your new venture with the best possible chance of success.
Remember, what you need and what you want are two different things. Learning how to spend your business budget wisely could just be the biggest gift you could bestow on your new start up.
Copyright 2021. Article was made possible by site supporter Trade Radiators.