7 Financial Planning Tips for Startups
Without a doubt, the success of every startup solely depends on scrupulous financial planning and how it is managed. Setting it up requires a lot of time and effort, and many entrepreneurs go out of their way to manage the process as effectively as possible.
However, not all business people are exactly aware of how to make it all work. In fact, based on statistical data, 16% of failures in the startup industry are linked to financial issues. What is even more concerning is that the failure rate for new startups is 90%, according to Exploding Topics. We don’t say that this failure necessarily has to do with finances, but in most cases, it definitely does.
So, to keep your startup afloat, you must educate yourself on effective financial tips. Let’s take a look at some of them in this blog post.
- 7 Effective Financial Planning Tips for Startups
- Step 1:
- Develop a Comprehensive Financial Business Plan
- Step 2:
- Create a Realistic Budget
- Step 3:
- Invest Your Own Money
- Get Inspired by Our Business Plan Samples
- Step 4:
- Manage Cash Flow and Be Aware of Fraudsters
- Step 5:
- Regularly Review Your Finances and Plan Adjustments if Needed
- Step 6:
- Understand Tax Obligations
- Step 7:
- Make Sure You Know Where You Want to Be
- Expert Business Plan Writer
- Let’s Sum Up
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7 Effective Financial Planning Tips for Startups
Step 1:
Develop a Comprehensive Financial Business Plan
Before everything else, it is important to develop a business plan that you and your employees will understand. Make sure to write everything down as comprehensively and clearly as possible, outline all the goals and objectives and how much money will be required for these. Talk to other people in the industry and ask them for advice on what is necessary to know when conducting a financial plan for the business.
A successful financial business plan includes your startup’s goals, target market, and unique value proposition. You can also take a look at your competitors’ planning goals and learn something from them.
Remember, finances like planning. To understand where your money will go, it is necessary to plan in advance.
Step 2:
Create a Realistic Budget
Many business owners have high hopes from the start. Even with little finances, some manage to take loans for their businesses in order to succeed and make high profits. This, however, doesn’t always work, especially if finances are not properly controlled by specialists.
To create a realistic budget, count the exact amount of money you are ready to invest in your startup. If it is not much, don’t get into debt unless you are one hundred percent sure your business will start bringing profit in the next few months.
It is understandable to want to achieve high results from the beginning, but realistically, it is not always possible unless you have endless money reserves and someone to point at your mistakes.
Step 3:
Invest Your Own Money
If you want to control your business, investing your own money is a good idea. Of course, you can involve investors, and that is something to consider, too. However, you should understand that in this case, you will basically share your company with other people, which is not something every entrepreneur strives for.
When it is your money at stake, you will realize the importance of careful financial planning. If it is somebody else’s money, it is easy to relax and expect a miracle.
Imagine this: your, let’s say, makeup brand blows up in just a few months. If you are the one who pays all the expenses, things will go smoothly. When someone else is involved, it will be hard to manage the process yourself, and you will have to consider other people’s opinions.
Note, however, that if that is okay with you, then searching for investors is something you should definitely go for.
Step 4:
Manage Cash Flow and Be Aware of Fraudsters
Managing cash flow is especially important if you don’t want to be duped or lose your money. Keep a cash reverse to cover unexpected expenses and ensure timely invoicing and follow up on outstanding payments to maintain a steady cash flow.
It is also necessary to be careful when you receive an invoice from a suspicious vendor. Startups, according to statistics, are highly susceptible to fraud, as sometimes there is no one who can carefully control payments.
So, whenever you receive an invoice from an email address you don’t recognize, check this email address on Nuwber. You will learn exactly who sent you an invoice and this person’s phone number and workplace.
Step 5:
Regularly Review Your Finances and Plan Adjustments if Needed
The plan you created at the beginning may not be what your business needs after six months. To find out what needs to be changed, pay attention to your financial situation and whether your company requires improvements.
Let’s say the amount of employees at the start was enough, but now it is time to expand. If this is the case, it is a good idea for adjustments in the company. This, again, requires careful financial planning that is reviewed and improved.
Step 6:
Understand Tax Obligations
As stated by Clerky, many states in the U.S. require companies to pay annual income tax filings, depending on the company’s activities in the state. So, if you are not fond if getting penalties and fines — which will lead you to losing more money — then you must obviously pay your taxes.
According to Nationwide, the average small business pays 19.8% of its income in taxes. To pay the exact amount, make sure you have a reliable and trustworthy accountant to do all the job.
Step 7:
Make Sure You Know Where You Want to Be
To succeed in the industry, write down all your goals and where exactly you want your company to end up in the near future. Are you happy with being a small business owner and are not planning on expanding? Great! Do you have aspirations and are sure that your business will be the next Pandora or Uber? Way to go!
Of course, it is not easy to predict, and there are plenty of circumstances that are out of your control. However, visualizing is what will keep you going, but don’t forget that it is extremely important to plan realistically.
Let’s Sum Up
Some startups succeed, some startups fail, all for one reason — financial planning. If you are ready to try, you will have a lot to learn, from budgets, investing, taxes, and more.
Remember, financial planning requires careful consideration and a realistic approach. Also, don’t be afraid to take action and use the tips from this blog post.
