For a start-up to survive in a dynamic business environment, Financial Management is a crucial element.
Benefits for Entrepreneurs – Scaling up a Startup
There are many benefits for an entrepreneur like being your own boss, work on your passion, reap significant rewards if the business succeeds, etc.
However, entrepreneurship comes with its own list of risks and losses too. Without proper financial planning, it would result in racking up monetary losses and ultimately closing down of business.
Importance of Financial Management for Startups
Start-ups must have a backup plan and an exit strategy in place during an adverse situation to cover the losses.
So, Financial Management is crucial for start-ups to strive and succeed in the long run.
8 Tips to keep your Startup Afloat during a Crisis
Here are few tips to keep your startup afloat even during a crisis.
1. Cash flow Management
Cash Management is a vital aspect of all organizations especially start-ups. As an owner, you must be knowing where every dollar is coming from and go to.
For a Start-up, the owner must always foresee the start-up costs. The conceptualization of your idea into a valuable product or service would require to shell out money for various aspects.
Keep Track of All Transactions – Maintain an Expense Sheet
Right from office facilities, to employee salary. There will be marketing expenses, production, logistics, manufacturing, partner arrangements, supplier relations, and many more.
The start-up ecosystem is quite complex with a lot of operations processes, cash flow requirements, and stakeholder engagements.
Managing Cash Flow is Crucial for Success of the Startup
There would be many instances where upfront payments would be required for the start-up to facilitate business.
Hence, cash flow requirements and keeping track of the events and transactions relating to cash flow is a crucial component for start-ups.
2. Track and Monitor the Spending Pattern
As a start-up, there will be expenses racking up from all directions. Accounting software to track and monitor daily spend is a must-have.
The transactions conducted through the start-up’s account must be constantly monitored. At the start, it might not be feasible to employ a finance professional to monitor the accounts.
So, start-ups can track the spending and monitor expenses through accounting & budgeting software.
3. Limiting the Fixed Expenses
At the starting stages, the expenses must be kept low to sustain in the long run. Take a smaller office space at an affordable area in your City instead of a large cozy office at the City Center.
Operate lean and allocate funds to your business capital. Start-ups must be focusing on strategies to generate revenue and not on taking fancy offices and amenities at the start.
4. Be Optimistic but have a Contingency plan
For a start-up idea to succeed, the founders must be optimistic about the market’s success and work for it.
They must be having a solid contingency plan for debt recovery and incise of any unexpected business loss. A business continuity plan is a pre-requisite for start-ups to sail through adverse situations.
It helps in strategizing the business processes and optimize resources such a way that the company runs profitably at all stages of operations.
5. Focus on Customer Acquisition
Identify various customer acquisition channels and work on optimization to lower costs. Customer acquisition is the key for start-ups to survive.
Customer engagement and delivering exceptional customer experience is the win for start-ups. It enhances the brand value and your customers will eventually become your brand advocates.
6. Establish Financial Goals
Establishing financial goals is very important for the entrepreneur’s capital growth as well as personal finances.
As an entrepreneur, you should be paying enough salary for you to live a comfortable life. As your personal expenses are met and satisfied, you could be focusing more on the company’s progress.
Financial Goal Setting to Scale Up Fast
So, financial goal setting is important for the entrepreneur and the company to achieve long term sustainability.
Start-ups should strive to cut down unnecessary expenses and operate on a lean basis to achieve financial independence.
7. Keep Personal and Company Finance Separate
The business owner must keep personal and corporate finance in distinct accounts. It will help to save money and secure personal life. In any adversity, the whole money would be drained off.
The entrepreneur must ensure their personal expenses and finance are taken care of.
Mitigate the Risk – Keep Personal Expenses Separate
It is important as it requires the entrepreneur to put in extra efforts to stay afloat the start-up as the market conditions would be unpredictable at times.
Start-ups will have to incur losses during certain business transactions often.
To mitigate the risk and reduce the liabilities of the owner from the company, holding distinct finances and accounts for the company and personal finance will help in diversifying the investments.
8. Networking with Finance Professionals
The role of a professional financial planner in maintaining your startup and personal finance is crucial.
They will give you advice on investing in short term funds, strategies to save money, budgeting your resources, and more.
Structuring the finances to reduce debts, taxes, other outstanding transactions is vital for the start-up’s survival in the long term.
To know more about Financial Planning and Business Opportunities in the UAE, connect with us right away!
Contact: Aurion Business Consultants