If you think that the financial aspect of your business is just about budget proposals and a hefty starting capital, you might want to change your perspective as early as now.
The first step to mastering your finances is to realize that it requires precision and strategy. As a startup entrepreneur, you may have committed (or are still doing) some financial errors that can be detrimental in the long run.
Which common financial blunders have you made? How did you deal with it?
Miscalculating (or not calculating) your burn rate
Your burn rate refers to the amount of money that keeps your business going. Do not underestimate your monthly finances. A minor miscalculation in your operational costs can push initial financial targets off track and cause major setbacks to your business. A strategy you can pursue is a bottom-up forecasting which allows you to make realistic projections based on actual variables instead of being overly optimistic on sales and revenue.
Lack of marketplace knowledge
It’s not about adding costs and meeting the margin you want to make. Not understanding your market may mislead you in pricing your products and services. What is your value proposition? Go back to your market and assess the identity of your customers, particularly what they need and why they will prefer your offering over your competitors.
Hiring and expanding right away
Too many employees can drain your funds. Find a strategy to keep costs low and save money on staffing. Aside from recruitment and salary costs, bringing more people to your teams adds physical costs such as office space, equipment and supplies. If in the end you have to disassemble your team because your company isn’t growing, how do you think your investors will react? What you can do is hire slowly and base it on an employee’s potential instead of relying solely on experience.
Doing your own finances
Managing finances is complicated and crucial. Increasing revenue means you have to deal with additional expenses to constantly grow your business, which is why you need to be strategic about monitoring your financial activity. If you know that it will be difficult for you to do this on your own, do not hesitate to seek financial support with your daily accounting and bookkeeping. This will save you a good amount of time which you can use to focus on the other aspects of your business.
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