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Common Financial Mistakes Startups Make

In a study a large number of startups, it was found that  50%of failed fell short because they ran out of cash, which is the common reason of failure. Whether on the personal or business front, the pain of poor financial planning cuts deep.

Financial management on how to spend  on your business, It goes without saying that cash is the lifeblood of your business. That’s why it’s vital –particularly in the early stages– that you have your finger on the pulse when it comes to the exact state of play of your finances. The old English saying, “look after the pennies, and the pounds will look after themselves” .

Common mistakes that startups make when it comes to managing that precious startup resource called money.

  1. WRONG ASSUMPTIONS

Trusting your gut  is done by everyone but don’t trust it completely. Do not assume things without thinking practically. When it comes to finances: err, no way. Don’t assume anything. We have technology at our fingertips that allows us to crunch numbers in just about every possible way. Every startup needs a system in place to track revenue against expenses to project cash flow over the next few months and beyond. It is the reality that a cash flow analysis cannot happen often enough during the early startup stages.

A little upfront effort in setting up a cash flow management dashboard has the potential to save you untold headaches further down the line. This can be done using either Excel, or some software .

 

  1. Relying on others to keep an eye on your finances

Nowdays one cannot trust blindly to anyone, you can’t be depend upon others specially when it comes to your finance. It is not that  don’t trust your head of finance  but by no means should you be leaving the financials to someone else without even so much as a cursory glance. Though it may pay to do so during those early startup stages you need to spend some hours to keep an eye on your flow. You should look carefully over your financial reports to make sure you have a clear and thorough understanding of the financial state of your business.

 

  1. Not setting A Goal

In terms of the success of your business, your financial goals are in many ways a measure of exactly how well you expect to be doing. By setting clear and realistic financial goals over a determined period – monthly, quarterly, yearly, etc. – framework in which to operate and make some of those very important growth-management decisions.

 

  1.  Acquiring Too Much Debt

First-timers need to get cash-flow positive as quickly as possible before trying to raise thousands or millions in capital. Get something working that’s producing cash, and then use that cash to grow and build your business once you see it’s working. Start small, and grow big. Too often, first-timers get up to their eyeballs in debt and count on future sales. But what if they never come?

 

5.Hiring and expanding too quickly

This is one of the greatest expenses of any company is its people. To keep your costs low, you need to consider ways to save money on staffing. A big mistake many startups make is to hire too quickly. Too many employees is a huge drain on your funds.

In addition to the recruitment and salary costs, there are additional physical costs so it is very important to make a plan of every spending money.

 

6.Not completely understanding your marketplace.

If you don’t properly understand your market, you may be guilty of mis-pricing your products/services. Don’t merely add your costs and calculate in the margin you’d like to make. Consider your market position and the value of your offering; start with price and work backwards. In your calculations, keep coming back to the marketplace: who is your customer, what need does your product/service fulfill, what do you have to offer, who is your competition, what differentiates your offering, and what trends may affect your market—and how.

When it comes to the finances, it pays to be a control, Losing sleep over the prospect of running into financial problems is a lot better than losing sleep over actual financial problems. Every Entrepreneur should try to avoid it for a successful startup.

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