Effective financial planning is the key to surviving and thriving as a startup in this highly competitive business landscape. Lack of financial planning and management ends up in momentous loss or sometimes closing down the business. This is why startups must have backup plans and exit strategies to cover the losses and rise again to compete against the uncertainties. There are several things that startup entrepreneurs can do to stay on top of finances.
Following are some proven financial tips for early-stage startups to help them plan for ultimate success and avoid pitfalls.
Establishing Financial Goals
Financial goals for startups should be attainable and measurable. Monthly, biweekly even daily goals help startups stay on the right track and make necessary changes to drive success. Accomplishing smaller goals encourages entrepreneurs to keep moving through the entrepreneurial journey without fearing failure. Establishing realistic and measurable financial goals is the rule of thumb to make your startup successful and stand out from your competitors.
Build a Realistic Budget Plan
Budgeting is always on the top when starting a new business and making it grow effectively. First, dedicate enough time for business budgeting to have a clear idea of how you will be paying for the startup costs and expenses while generating revenues at the same time. Next, identify the financial resources you will need to reach your goals. Finally, determine all your startup costs and subtract them from revenues. Budgeting helps you align all your business costs with available funds or resources to stay top of business finances. This also enables you to determine and avoid unproductive costs to boost your profit margins. While creating a budget plan for your startup, be strategic with your business marketing and sales strategy, never to miss a single sale opportunity to enhance your returns while saving business money at the same time.
Establish a Simple Accounting System
At the early stage of your startup, you don’t need highly professional accounting solutions. But you need to set up an accounting system that is simple enough and lighter on your business budget as well. There are many free or low-cost accounting solutions your startup can choose from to streamline financial management without breaking the bank. Then, scale the system when your business grows to ensure there will be no issues when managing the financial records of your business.
Get a business credit card.
Business credit cards come with myriad financial benefits and features for startups. More than a financial tool, a business credit card helps you keep business finances separate from your finances while saving business money also. Benefits like free rewards, sign-up bonuses, balance transfer offers, cashback, and shopping discounts help you save a significant amount of business money. The saved money can be used to grow your business operations and increase revenues. However, you should choose the right credit card for your startup with the right benefits and offers to get the most out of that.
Make Sure you Pay Yourself a Salary.
Your smart business ideas and hard work alone will not fulfill your daily needs. You need to pay yourself a salary so all your day-to-day needs can be fulfilled. Instead of compensating your efforts with a huge sum of money at the early stage, you should pay yourself enough money to satisfy your needs. Pay yourself enough salary to live a comfortable life and stay focused on growing your business without facing financial stress. This fulfills your daily needs and keeps the business money separate from personal finances. You can use personal money (salary) on personal needs to keep the business money for business growth and success.
Creating a startup is easier said than done because several obstacles and issues always arise. However, having the right knowledge and following the basic rules can lead you towards immense success and growth. The above-mentioned financial tips for early-stage startups can work well for almost all new businesses to avoid financial stress and stay on track.