Starting your business is the first step towards becoming the next big thing, as you certainly envision your business’s growth. However, the journey may turn out to be rough, especially during the first few years as you try to find your footing. Like many other start-ups, finances will be stretched thin. Don’t let things get so bad that you close shop, like 20% of businesses that burn out within the first two years. Be smart and make every dollar count. Here are five tips to point you in the right direction:
Be Thorough with Research and Planning
Lack of a good and exhaustive business plan derails most start-ups during their first years of operation. They don’t have solutions for challenges, both foreseen and unseen, and they don’t have any particular strategy going forward. Do thorough research on your business idea and industry niche/market before actualizing anything. Use the analysis to formulate a good business idea, and be especially exhaustive with the financial elements: funding, commercial projects, and more. Make your plan flexible so that you can make up for changes as they present themselves. You cannot afford the luxury of rigidity until you find a firm footing!
Make Your Business Adaptable and Keep Up
The rise of the digital commerce platform has made it incredibly easy to launch and grow a business with limited resources. As such, make use of technology to minimize costs and improve productivity. This is not an option – there is an ongoing shift to the digital world, and you risk getting behind if you don’t adapt and keep up. Be warned; technology moves at a break-neck speed, so keep your systems flexible and try to get ahead of the competition.
Make Good Use of Financing Options
As you will soon realize, funding is one of the most significant challenges of running a business. The majority of companies rely on external financing when starting up. This doesn’t stop as the business expands and grows. Even the biggest multinational corporations rely on multiple streams of funding. You should seek financial help when getting up on your feet. However, be wise where, when, and how much you borrow. The rule of thumb is to keep the interest rates on your loans low and maximize every dollar’s impact. Consider SPV administration (special purpose vehicle) for your fundraising campaigns. Additionally, maintain a clear balance between your personal and business finances under all circumstances.
Maintain Health Cash Flow
Your business needs a constant flow of cash to keep going. You need money to pay for utilities, replenish your inventory (products/services), pay the staff, cater to emergencies, and more. This is why it is vital to maintain healthy cash flow. This essentially means securing enough money to circulate within the business. However, good cash flow habits go deeper than that. They entail:
- Keeping standard, consistent, and up-to-date financial records
- Utilizing professional accounting services
- Separating personal and business finances, as mentioned
- Striking a balance between debts and revenue
- Making exhaustive budgets for all business operations
Again, track every dollar and ensure that it helps your business move ahead. Financial goals also help but don’t constrain your operations – be flexible and adapt to changing circumstances as best as possible.
Cut Costs Every Opportunity You Get
Your business deserves the best that money can get, but you need to operate on a small budget to get to that point down the road. Take every opportunity to cut costs – however, don’t use this as an excuse to escape costly but necessary responsibilities, so be wise where and how you cut costs. Here are some tips to help you make your budget more efficient:
- Minimize your initial start-up fixed costs, including rent, loan interests, and insurance
- Make your business compliant with all rules and regulations to avoid expensive penalties
- Practice smart hiring by going for passionate, talented, and self-driven employees with your business’s best interests at heart
- Continually assess risks and always have a plan to fall back to
Again, make everything you have at your disposal count. It may feel constrained now, but your budget will increase as your business grows.
Your business can rise to the top and become the empire that you envision. Before then, however, you will have to tighten your belt and make your finances count. These five tips have proven practical every time.
