When you first start a business, it can feel like a bit of a whirlwind of things to do. Between getting all of your back-end operations in place to going out and finding customers (not to mention doing the actual work), it can feel like every hour of the day is filled. But when you’re so focused on the details of running your business, it’s all too easy to lose track of the most important part of it – the finances.
When around 90% of start-ups fail, making sure yours doesn’t end up as another statistic is going to be pretty high on the priority list. That means you need to know how to handle your finances properly from the outset, and what the most frequent pitfalls are for start-ups. While there are a lot to look out for, here are a few of the more common issues we see start-ups encounter, and how to avoid them.
Moving Too Fast
Rome wasn’t built in a day, and neither will your business. Even the business giants like Mark Zuckerberg, Jeff Bezos and Larry Page (Facebook, Amazon and Google) didn’t enjoy instant success – there was a build-up process. They spent time in developing their products and refining them before launch and did a lot of the grunt work to make the business succeed in the beginning. So, expecting your business to explode overnight is just absurd – and is one of the biggest pitfalls start-ups fall into. This leads to frustration and disappointment and may actually harm your business’ growth. Remember, it took the human race thousands of years to make it to space. Spending time working things out and building up is not a bad thing.
No Budget, No Plan
Budgeting is something almost every financial adviser will talk to you about. The analogy we like to use for this is:
‘Would you get on a boat without a rudder?’
No – because you would have no control over where it’s going. The same goes for your business. Having a plan and goals in place gives you something to aim for and a path to follow so that you can make decisions that will support those goals.
Once you have a plan, you can then budget effectively to meet those goals. Your budget informs things like creating KPIs, investments, when to launch new products, or upcoming problems. This can dramatically increase your chances of success. For example, how is your business going to make and spend money? When are you going to break even? What are your profit margins, and how does your cash-flow look?
Cash Flow Management
Good financial management underpins everything your business does, which is why it’s amazing that so many businesses don’t engage in it until they are much larger. This usually means hiring an outsourced finance department to help you put systems in place, manage your day-to-day finance functions and help you plan for the future growth of your business – including hiring an internal team. Having a trusted finance team on board goes way beyond basic accounting transactions and chasing invoices and can set your business up for rapid growth and success. It can help you lay out your financial framework, keep everything looking healthy and organised, design financial plans and ensure your targets are achievable.
Trying To Do It All Alone
It is almost impossible to run any sort of business on your own. Everyone needs at least some help. If you fall into the trap of trying to do everything yourself, you will quickly find yourself overworked, with a lot of frustration at the results of your effort. You can’t be an expert in everything, and bringing on board freelancers, employees or other external support can help you achieve better results, grow faster and improve the quality of your business tenfold. So ditch the overly controlling and DIY attitude, and embrace the support around you.
Of course, if numbers really aren’t your thing, or if you don’t have the resources to handle your finances yourself, you can always ask for help. At Adstrum, we work with fast-growing start-ups with big dreams, helping them achieve their goals with sound financial planning. If you’d like more information or advice, please just get in touch with the team today.
