Entrepreneurs are the driving force behind the economic success of any nation and develop a culture of innovation. Startups create jobs, build capability, create and distribute value in the society. About 50% of new startups fail in first 5 years, and about 2/3rd of new businesses vanishes in first 10 years. The reason is lack of money. Despite all the challenging work, owners need few financial hacks to capitalize on its business idea.
1. Outsource all you can – Entrepreneurs are self-made, but Businesses are experts-made. Owners work round the clock and prioritise on development, operational and marketing cost. To keep HR expenses low, specialist tasks like developing a pitch deck can be outsourced to a professional fundraising advisor. Successful startups outsource tasks to experts and gain advantage in terms of money and time saved. Managing time for business priorities is crucial for your business to succeed, so outsource all you can, as Time is Money. Entrepreneurs may lose their passion and drive if this financial hack is not deployed.
2. Taxation & Cashflow management – All budding entrepreneurs are hard pressed to spend more for gaining business, but taxation does not get its due. Corporate taxes are a sizeable chunk of the operational cost, Startups must manage taxation in accordance with the law but ensure its impact is minimal in the initial stages of growth. As taxes can accrue over time, outsourcing taxation strategy to a corporate service company can yield good returns.
Every owner knows that “Cash is King” but poor cashflow management can lead to catastrophic consequences. Entrepreneurs must have cash to thrive in the business. Always keep a constant check on the money inflow and outflows. Cashflow management is not just a hack, but a survival mindset to ensure that business survive and come good to plan for the growth and expansion stage.
3. Online Tools - In this digital world, online tools are available at negligible cost, to perform essential but resource consuming tasks. Instead of hiring accounting person use online accounting tool, e-invoice and e-payment tools for financial transactions will be time and money wise economical. Use Google’s customized Gmail service for communication, rather than setup your own email server. Use cloud computing tools or services, in place of costly IT network. This financial hack is available for free trials to ease work and be cost-effective.
4. Separate Personal and corporate Accounts – Your business has an identity of its own and is different from you, so why keep accounts / finances as one. The money earned by your business is not yours until unless distributed as a rewarding dividend. Maintain and monitor separate personal and business accounts, to judge the performance of your business, reliable earnings and expenses data, to develop cash reserve for the business. It may even lead to potentially harmful lawsuits/ claims if both are not maintained separately. Moreover, personal bankruptcy is equally damaging for your reputation and the success of your business.
5. Be Alert with your Equity – Equity generates returns eventually so be careful about your liabilities. A negative net-worth is a threat for the credit score of your business and can wind up business operation too. So, an entrepreneur needs to be vigilant and raise debt judiciously. The power of your idea will excite investors, but only positive equity value generated from business operation will convince the investors about the viability of your business, offering money in return for the equity you hold.
6. Be SMART - Simple, Measurable, Achievable, Realistic and Timely goals are the most critical elements of a business plan. Be SMART in budget planning too, for your plan to succeed. Review expenses and inflows to arrange funds for the survival of business every month. Any mismatch in timing or quantum of money can be counterproductive to your business. So, plan well, and break down the financial goal in smaller steps to keep the progress on track for a successful venture.
Any new business gives a boost to your life, but you need these financial hacks to inject back a profitable and sustainable success in your business. The real value of these financial hacks lies in entrepreneurs using it and businesses benefiting from it. Get free consultation with experts at AlphaValley to raise funds!