Here’s a frightening statistic at the start of this article – sorry to begin with the bad news!
According to the article at www.recruitment-international.co.uk, around 8 in 10 startups fail within their first year. Between 2007 and 2016, that was over 39,000 business, and we are only talking about the UK. That figure will be multiplied when taken at an international level.
In most cases, the reason for failure will be centered around financial matters. For example, many entrepreneurs try to scale their business too quickly, spending too much money within a short time-frame. If they don’t receive the expected profits, then a financial disaster is just around the corner. This is one lesson that many new startup owners need to learn from, reducing the risk of failure by operating a little more financial wisdom. And there are other ways to reduce the risk of a financial disaster, as will be outlined below. Because here’s the good news. Not every startup is destined to fail, as by implementing good practice and using basic common sense, a financial disaster can be sidestepped.
#1: Have finances in place at the beginning of your startup
It’s rare that a startup can begin without some financial backup at the outset. So, before your business begins, find ways to bulk up your bank account. From bootstrapping to crowdfunding, there are some ideas at www.finextra.com on how to secure business capital for your startup. You need enough money to start your business, with a surplus amount to cover you for the first six months at least, as profits are not always guaranteed immediately.
#2: Seek financial assistance
Particularly when you don’t have a head for finances, you should seek help in this area. An accountancy firm is your best option, as they will have the skills needed to help you budget, make financial goals, cut costs, and manage your taxes. Online accountancy firms, such as the good folks at www.approved-accounting.co.uk, will also help you with the technological side of your accounting, providing you with advice on the best accountancy software to use for your small business. With expert help and technology in place, you are less likely to get into a muddle with the financial side of your business. Despite the extra expense in hiring such a service, the financial benefits are more than worth it.
#3: Cut costs where possible
As a business, you will have a range of expenses to deal with. There will be your usual monthly overheads, such as energy bill and insurance costs, as well as those occasional outgoings, such as buying equipment for your business and paying for the occasional outsourced service. Thankfully, savings can be made in almost every area, usually made by shopping around for cheaper deals. We have some advice on how to reduce some of your outgoings here,
www.oppchamber.com/, so relate our article to your business operation. Remember too that cutting costs is also about not spending at all. If your startup doesn’t need a particular item – those nice-to-have (but inessential) items such as a coffee machine – it’s in your best interest to wait until you have the extra finances in place before you make such a purchase.
#4: Insure your business
Disaster might strike at any time, and in doing so, your finances could plummet. Your business might be burgled, for example. The weather could damage your premises. A customer or an employee might seek compensation if they have been involved in an accident at your place of work. Any one of these situations could weaken your financial position, but if you have insurance in place, you can soften the blow to your business. There is a handy guide to the insurances you might need for your startup at www.startups.co.uk, so again, despite the extra expense you will be incurring each month, the expense is more than worth it. And as we suggested earlier, remember to shop around for the best deals to make a saving.
#5: Put the work in
Finally, the best way to protect your startup from a financial disaster is to work hard! Being self-employed, you are responsible for finding work and getting paid, and neither will happen if you don’t make the effort. Spend time marketing your business so you successfully acquire enough customers and clients to keep your business going. Care about the quality of your work so your business receives good word-of-mouth. And despite being your own boss, resist the urge to have too many days off when you really need to be in the office. You do need to have a work-life balance, using the tips listed here, www.eu-startups.com, but the key word is balance – your business won’t survive if you favour your leisure time over your work time.
Seek help, be financially wise and work hard. By following the steps we have suggested, you are protecting your startup from a financial disaster, and consequently, business failure. The onus is on you, so if you are about to start your own business, or if you are already working for yourself, do what is necessary to alleviate the financial risks to your startup.
We wish you every success.