Startup success is possible, but never easy. Most entrepreneurs attempting to grow a company from scratch will find the financial challenges to be the most trying. In Canada, over 7,000 businesses a year end up bankrupt. Handling your money is vital to your business enduring the development process and lasting success. Any new startup hoping to stay financially afloat should utilize these 5 following strategies:
1. Focus on Cash Flow Management
Many startups fail even before they get off the ground. The most common reason for this is that new businesses simply run out of money. When you have to pay for the location, supplies, employees, etc. it’s easy to lose track of your finances. When managing cash flow, you need to keep a record of every incoming and outgoing dollar: income and expenses. When you do this, you obtain an accurate picture of your exact cash flow.
Alternatively, businesses that aren’t cognizant of their cash flow management will find themselves hitting a brick wall. Once a business runs out of money, it’s difficult for it to bounce back.
2. Efficiently Track All Spending
Similar to managing cash flow, being able to track your spending is essential. Ensure you are using the most efficient software to monitor how much money you are spending. Quickbooks and Wave are both excellent options, both being geared toward small businesses. By automating the process, you can effortlessly monitor your spending. This will allow you to pull together information easier when tax season comes around.
3. Limit Fixed Expenses
As a business owner, you need to keep expenses as low as possible to ensure that your company enjoys longevity. You should work to operate with the bare minimum, so that monetary resources can be allocated to growing your business. Many startups fail because they try to overspend on amenities instead of focusing on generating revenue and cutting their expenditures.
4. Always Prepare for Worst Case Scenarios
Nothing ever goes as planned in life or in the world of a business owner. Founders should do what they can to prepare for the worst scenarios. For example, to protect a company from running out of money, business owners should have reserves stashed away in a savings account. While this money should only be used in emergencies, it can be the company’s saving grace when worst comes to worst.
5. Always Value Your Time
The saying “time is money” is never truer than it is for small business owners. The time that founders put into their businesses has value. Allowing for this shift in mindset will help business owners stay focused on what matters. Anything unrelated is a waste of time, and ultimately, a waste of money.
New business owners hoping to succeed need to ensure that their finances are properly managed. Founders looking to get a better handle on their business’ finances should always keep these 5 strategies in mind.