A startup can build on the best idea in the world and have incredible leaders to usher it to growth and success, but if the money isn’t there, there’s likely to be more bust than boom.
Whether you’re a competitive London-based startup or a local startup driven by passion, getting your financial planning right is crucial. 60% of UK startups fail within the first three years, so you’ll need to pay close attention to all aspects of your venture if you’re to beat the odds. Here are some tips for going about your financial planning.
Create a detailed budget
The first step in any financial planning is to understand your finances from top to bottom. Create a comprehensive budget that outlines your forecast income, likely outgoings and any other financial factors. This includes everything including rent for your premises, utilities, salaries and marketing costs.
Having a clear understanding of your financial commitments helps identify potential bottlenecks, strategise more clearly and allocate resources effectively.
Build a contingency fund
The business world is inherently unpredictable, and unexpected expenses can arise at any moment. Establishing a contingency fund can serve as a financial safety net, providing a buffer for unforeseen circumstances so your business doesn’t suffer too greatly.
Aim to set aside a percentage of your budget for emergencies, allowing your startup to weather storms without derailing growth and progress.
Prioritise investments
Identify the key areas where your startup needs to invest. Whether it’s technology, marketing or talent acquisition, allocating funds to the most critical aspects of your business ensures you’re maximising the impact of your financial resources and return on investment.
Be discerning about where your money goes, focusing on activities that drive real growth and value.
Monitor cash flow
Cash flow is the lifeblood of any startup. Regularly monitor incoming and outgoing cash to identify trends and potential issues. This is often best done with the assistance of a specialist accounting firm that can advise you on best practices.
Staying on top of your cash flow allows you to make informed decisions about when to reinvest, cut costs and seek additional funding. Without sufficient levels, the cogs of your business will grind to a halt.
Negotiate wisely
Negotiation skills are invaluable in the startup world. If you’re dealing with suppliers, vendors or investors, the ability to secure favourable terms can significantly impact your bottom line. Be proactive in seeking better deals and maintaining healthy relationships with your business partners.
Regularly review and adapt
Financial planning is an ongoing process, not a one-time task. Regularly review your financial performance and cross-reference it against your initial projections and budgets.
With this insight, adjust your strategies accordingly to ensure your startup is always moving in the right direction. Flexibility is key in such a competitive commercial ecosystem.
