A challenge with startups is the misconception that many fail within the first two years. The reality is, many fail within the first year. That is 365 days to get a startup off the ground and running full speed. When launching a startup, there is a huge time and energy commitment most people don’t realize. While the stats seem alarming, there is some strategizing that goes along with making sure the business stays afloat. Mainly, cash flow is king. Cash flow problems can derail a business before it ever takes flight. Find out why it happens and learn some tips to keep a business afloat in a sea that is brimming with startups.
The most common age for startups is 50 to 59-year-olds. This may seem late in the game to be starting a business, but they have expertise and knowledge nobody else has when it comes to running and operating a business. They may have more saved up from previous work and want to invest their knowledge into building a legacy for their future generations and legions of younger workers who are eager to work for a startup. When considering the cashflow issue, it helps to know that most businesses (around one third) require personal savings to get off the ground. Projecting a rate of running a business at or about a year before funding dries up does not leave much room for moving things around, challenges that will come along, and getting the right workforce in place.
Glass Half Empty
The first tip to think about when looking at finances for startups is that entrepreneurship is not for the faint of heart. It is a business where a person must be foolhardy enough to believe in their vision and mission and believe in themselves enough to pursue that vision to the nth degree. That makes, doing anything to make it possible. At some point, the person must be a bit ‘glass half empty’ to consider all the possible setbacks and scenarios that might take place. There must be enough cash reserves to coast through payroll and meet other needs.
For businesses to be successful, they often draw on lines of credit to get the business going. Utilizing a line of credit can be critical to a business’ growth. Credit helps cover upfront expenses, but not overspending is key. Getting into debit or pulling off lines of credit for business debts can cause more harm than good. Think ahead about what returns on the purchases will be and make sure to capitalize on that.
Something many don’t want to think about is paying bills ahead. Most can hardly pay their bills by the due date, let alone ahead. Think about it this way. Accelerated payments can encourage discounts, less money on interest, and saving that for capital expenses down the road. Getting invoices paid to keep cash flow running smoothly is critical. Build a relationship with vendors, but don’t be a pushover.
Keep it Flowing
With lots going on between the bank accounts and cash flowing in and out, be sure to watch liquid assets. Don’t miss out on an investment if earning returns can bring in more assets. When it comes to investing, be smart, but think about having enough on hand in case of an emergency.
Startups Are Not End All Be All
Everyone seems to idolize startup culture as a sign business is booming. Startup culture is intense because it means getting out there, building a reputation, and making sure it sticks long after people forget about the startup phase of the business. Without investors seeding money, be practical about what it takes to start a startup, keep it going, and sustain the business for the long haul.
It is not easy building a startup, it is rather difficult because there are such high expectations. The investors want returns, customers want products and services, employees want benefits, and the list goes on and on. It is endless the needs that have to be fulfilled early on, but if a company plays its cards right, it can find itself with a brand new startup that is successfully creating opportunity for new products and services to be seen and building a spot for it in the marketplace as long as the owners can stay the course and keep cash flow in check.