The high small business failure rate in the United States is well-documented. You certainly know that about 20 percent of new business will die within a year.
What you probably don’t know is that of these failed businesses, a whopping 82 percent attribute their failure to financial challenges.
How to Manage Business Finance for Startups
As a startup founder, this is the kind of stat that can keep you awake at night. The truth is if you don’t get a firm handle on your finances, your startup will likely run into challenges and fail.
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Start Out with Adequate Capital
A major mistake startup founders make is starting out without adequate funds, and it’s easy to see why.
Raising startup capital isn’t an easy thing, especially when you need a lot of money. Most-high growth startups go through several rounds of funding before they can raise the required capital.
When some founders are unable to raise adequate capital, they resolve to go into business with the amount of money they have at hand. This leads to disastrous results.
Without adequate startup capital, there’s a good chance you’ll run out of money to fund daily operations before the business becomes profitable.
If you do, you’ll be forced to raise more funds urgently, which isn’t always possible. Or, you’ll end with pricey business loans.
Track Your Cash Flow
Every day, there’s money coming into and going out of your business. This is cash flow.
How well do you keep track of cash flow? You probably monitor every cent that comes into your business, but what about the expenses?
Don’t just keep track of the big expenses like rent, salaries, and payments to suppliers. You also need to keep an eye on the petty expenses because they can add up to a big amount after some time.
When you have a complete picture of your cash flow, it’s easier to assess the financial health of your startup and make changes where necessary.
Keep Fixed Expenses Low
Fixed expenses are things like rent, insurance, interest on loans, salaries, and utilities. Regardless of the state of your startup, these expenses have to be met; otherwise, there will be big consequences. For example, if you don’t pay rent, your landlord will evict you.
As a startup, it’s prudent to keep your fixed costs as low and manageable as possible. This will help ensure you don’t run out of working capital quickly.
Work with Professionals
Are you in charge of your startup’s finances?
If you’re, you aren’t doing yourself any favors. You already have many responsibilities on your plate, which is why you should let professionals handle your startup’s finances.
You can hire a CFO, but that would be too costly for an early-stage startup. The right thing to do is to outsource the function to a company like Avitus Group.
Managing Business Finance for Startups Made Easier
Managing business finance for startups is something most founders grapple with. Money is the lifeblood of your business, so you can’t afford to mismanage it.
With these tips, you’re now in a better position to manage your startup’s finances. Keep reading our blog for more startup tips and insights.
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