Financial startup basics are the essentials that startups need to be aware of to ensure their financial health and secure the funds needed for growth. Nine out of ten failures in startups result from the absence of these fundamentals. The reason is straightforward – cash flow. Startups that do not know how to track and forecast cash flow will be unable control its budget, or invest in growth.
The most important accounting records for startups like income statements (revenue and expenses) and financial projections are crucial to prove the viability of your business plan to investors. These models must be carefully calculated to accurately reflect the true economics of your business which includes cost that are easy to overlook such as taxes, shipping as well as insurance, payment processing fees, and utilities.
In the beginning startups may be able to get financing from family and friends, if traditional lenders aren’t an option. In this instance, however, it is crucial to have any terms of the loan written down so that there aren’t any conflicting repayment obligations or future performance expectations.
Startups can also seek out venture capital from a private investor or even crowdfunding platforms such as Kickstarter. However, these kinds of funding usually require the creation of a business plan in writing which includes a thorough financial model. You can better understand the financial situation of your business by creating a model. This will allow you to make educated decisions about the amount of capital to invest and what strategic goals you want to achieve over the next year.
Recent Comments