Money is one of the biggest challenges when setting up a brand-new business. A large proportion of startups fail within the first year because their owners had not made suitable preparations. So, what can you do to guard against this issue? In this article, we explore a few different ways in which you can prepare yourself financially for the big steps that lie ahead. (Image Credits: Karolina Grabowska/Pexels)
Vague estimates are worthless when you’re going to be working with very real expenses and charges. Don’t just assume you’ll always be able to get a great deal on every aspect of your set-up, and avoid taking too much onto your own shoulders in order to save money. Get real-world quotes wherever you can, and don’t forget to include a well-calculated contingency for unforeseen costs. On the other hand, don’t aim for a budget that is clearly far too large for your purposes. If you can’t justify all the money you’re asking for, you’ll be less likely to be awarded a bank loan. Investors may also become suspicious. You might even find yourself under investigation for fraud.
Revise Your Personal Position
How are you doing money-wise? A company owner who is financially stable is a far more attractive prospect for investors and business loan providers than a person who is heavily in debt. Undertake a credit check and explore your accounts. For a quick solution, you can now get matched with options for financial solutions in less than 60 seconds, whether you require a personal loan, a better way to handle your credit card debt, or a means of financing your new venture.
Keep a clear record of quotes, invoices, and receipts. It’s important to get into practice for this now, as it will make filing tax returns easier further down the line. It will also enable you to understand exactly where all of your money is going and coming from, which means you’ll be able to realistically adjust your budget month to month.
Consider Now and Later Expenses
It’s a good idea to prioritize your company’s requirements in order to spread out its running costs. If you’re planning to manufacture your own products, for example, why not invest in the equipment and machinery required for a single line, then gauge interest before buying more? It’s easy to over-prepare and find yourself in possession of extra assets that you don’t need and can’t get rid of. On the flip side, you should never put off necessities like insurance, health and safety adherence, and marketing until further down the line. In their different ways, each of these matters requires a significant investment to ensure that your business doesn’t fail.
Run Financial Risk Assessments
What is the worst thing that could happen to your business in a financial sense? Say, for example, that you’ve made a great deal with a stockist but they go under shortly before your product is due to hit shelves. How will your company survive? It’s a good idea to budget for both rainy days and sunny days. Calculate and re-calculate your finances based on the best, worst, and most likely scenarios. By doing this, you’ll be able to come to more sensible decisions that will make failure less likely.