Most start-ups die within their first year for one simple reason - poor financial decision. While that may be oversimplifying the issue, the statement is still accurate. For your great idea to get off the ground, you must practice sound financial management.
1. Keep Expenses Low at the Start
Keeping your start-up's initial expenses low is important for longevity. That means settling for a smaller office, or opting out of catered meals. Not having them now allows you to funnel more capital into growth, which will eventually lead to a situation wherein those perks are financially possible. Your focus should be on generating and maintaining revenue streams, not pimping out the office crib.
2. Remember That Time is Money
Time is money. Not literally, but the amount of time you spend on the start-up has value. Think about the difference between hiring someone to wash your clothes, washing your clothes yourself, and spending time at the office. If it takes an hour to do the wash, and you can make $10 an hour, that's how much washing your clothes cost you. Consider what something actually costs you when you do that instead of working on the company.
3. Focus on Getting Customers
Failing to acquire customers is a common reason for startup's shutting down. No small business, no matter how promising, can succeed if it can't get customers. No customers, no revenue. The top of your to-do list should involve crafting a sound customer acquisition strategy and applying it. That includes identifying your target market, finding out where they are, and attracting them. Focus on the most promising opportunities. You can't afford to go after every lead.
4. Monitor Spending
Money can get away from you fast. Before you know, all those little coffee or chair purchases have transformed into a financial burden. Capital's running thin, and the start-up's in trouble. Don't get caught in that trap. Keep an eye on your expenditures at all time. If you have an accountant, check-in with them regularly to make sure you're not going over budget.
5. Set Financial Goals
Saying that you want to be rich isn't enough.While it doesn't seem that way now, setting a specific goal matters. It'll determine how much work you have ahead of you, as well as the things you're willing to do.
Setting exact goals will also let you stay on track. There's a lot of things to consider as an entrepreneur. If you don't have specific goals and metrics for progress, you can easily get distracted and lose track of what you've accomplished.
In the midst of trying to manage your start-up's finances, don't forget to pay yourself. No amount of dedication is going to beat starvation or homelessness when it comes to running a small business. Keep yourself healthy and keep an eye on the money. Treat it as you would yourself - with care.