Need to manage your finances in your startup? Here are some tips which will help
Money can be an overwhelming factor while starting a business – it has the attribute of a grey cloud that’s constantly hovering over your head, threatening to dampen your venture. The unpredictable moods of the market hold the reins to your finances, so it plays to your advantage to be prepared. The most preparation you’re humanly capable of is learning how best to manage your capital.
Financial undertakings are not successive steps that you can take; they tend to be interspersed. This can be highly confusing for an entrepreneur who is only just getting familiar with the terrain. Clearly visualising these steps, however, can help you keep your head above the water.
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Personal is not synonymous with professional
The most natural move while starting out is to have the same source of capital for your personal and business activities. This is a habit that you need to grow out of, at the earliest. The professionalism you exercise reflects on your business; be organised and maintain a separate account for your business transactions. This will help you keep better track of your startup’s expenses and keep confusion at bay.
Don’t let expenses get crafty
Review your expenses stringently and regularly. Spent money has the notorious reputation of a dream that gets further and further away from memory. Trying to track it after it has entered the vaults of history is futile. Comparing your expenses weekly will give you a clear picture of your investments and will tell you whether or not to cut down, increase or find better ways to invest.
People are good investments
When you’re starting out on your own, playing different roles and taking on multiple tasks is unavoidable. You need to realise, however, that time equals money; every minute that you spend, away from your responsibilities as the founder chips away on the growth of your business. So while you thought you were saving capital by maintaining a low head count, your startup was losing out on your attention and expertise, and eventually, profits. Invest in skills that’ll help your business better than you can. The only long-term investment that’ll keep the gates of profits perpetually open is a good team.
Add a faucet to your capital flow
Investing in small increments is the way of the wise. No matter how promising your product’s performance is or how rewarding customer response is, bankruptcy won’t be too far away if you invest everything in one go. Simultaneously targeting all your growth areas (human resource, marketing, and technology, to name a few) can deplete your capital sooner than you can keep track of it. Prioritising before you invest is still the safest way to manage your finances.
Don’t underestimate efficiency
Technology is a significant factor that controls efficiency – and efficiency needs attention because it translates to money. Upgrading your technology can be a costly affair but the returns will be in the form of increased efficiency and productivity, both of which reduce the pressure on your financial budget. Hiring a Chief Technology Officer (CTO) that can take care of the all technical systems making up your website interface will ensure that your business runs smoothly. The whole process is very much like tidying up a desk; not only do you work better you also present yourself better.
The double-edged sword
Conducting a cost-benefit analysis before deciding to invest will extend your reach of forecasting the returns. It is a way of picking out the most cost-effective approach to achieving a small-term goal; calculating the costs of an undertaking and the benefits it reaps, and the difference in those numbers, will give you a clear picture of what is higher – costs or benefits. Knowing which outweighs the other is a significant power to hold because it can have a tremendous impact on your finances.
A sound understanding of the market will help you formulate the timing of your financial moves and predict outcomes with better clarity. If you know of other financial hacks to look out for, let us know in the comments below.