It is estimated that 90% of all modern startups fail and most of them go under during the first two years after launching. The biggest hurdle on the road to survival is the lack of financial planning. On a brighter note, some of the most successful startups of today have overcome this obstacle and attracted hefty funding as a result.
They understood that cash flow is the lifeline of any startup’s existence, the only fuel that gets your vehicle over the finish line. Therefore, every business organization must awake to this reality and justify itself with solid figures on the bottom line.
Formulating a game plan
In the slowly recovering economic landscape, wasting time or money is not an option.
The only problem is that achieving optimal resource allocation is a complex and demanding undertaking. One has to tackle the numbers game, identify present needs, and uncover future trajectories. Namely, it is of the utmost importance to figure out how much money you need to fuel operations and anticipate when you are going to run out of it.
So, to lay the copper-bottomed foundations for sustainable growth, a startup must put a financial plan in place. This crucial document encompasses various financial statements and forecasts. To be more precise, it includes profit and loss statements, balance sheets, breakeven analysis, cash flow statement, personnel plan, and sales forecasts.
These sections look like accounting statements that startups generate, but their nature and purpose are different.
Tools and tricks of the trade
Many business novices and newcomers struggle to understand these moving parts, but do not fret. Right from the get-go, enlist as much help as you can. Do not hesitate to outsource some financial tasks in case you have insufficient resources or expertise.
Professionals in the league of this tax accountant from Sydney can help you grasp the financial requirements and carry out various aspects of financial planning. It really pays off to seek trusted companies that offer complimentary financial health check, asset protection, tax strategies as well as planning, insurance, bookkeeping, business development, and finance services.
I would also encourage you to take lessons from startups that managed to hit it big and make good use of business planning software solutions. They make your life much easier, enable you to visualize data, and streamline the whole planning process.
A reality check
It all comes down to taking a forward-looking view and being realistic about your prospects.
Avoid misleading, hockey-stick forecasts at all costs. Bear in mind that you are making estimates based on past and present results and findings— instead of calculating details in your reports, you are summarizing and aggregating. You have no crystal ball for predicting factors such as future depreciation, but you can make an educated guess.
Focus on sales channels, revenue streams, market research, and the segment you are targeting. Create an income projection as well as an expenses budget. Distinguish between fixed costs such as rent and payroll and variable costs like advertising and promotion. Factor in all the assets and liabilities in the balance sheet section.
The vision comes alive
Furthermore, decide what type of business financing makes the most sense for your organization at the present moment. You have various options at your disposal, such as cash advance, business loans, equipment purchase loans, commercial mortgage loans, etc.
Along similar lines, note that a financial plan allows startup owners to spark interest and build trust with venture capitalists, banks, and angel investors. Ultimately, it helps entrepreneurs communicate their vision to partners, employees, and funders.
In any regard, your numbers should speak volumes about your potential for growth. However, always play by the book and refrain from juking the stats. A startling growth forecast may look good on paper, but investors can usually sniff out overblown figures.
Finally, remember that a financial plan is a document that’s liable to change as new circumstances and realities roll in.
Self-fulfilling prophecy of success
Money makes the business world spin and it makes or breaks a startup.
There is no other way to become a sustainable business than to create a financial plan as sound as a dollar. It guides your day-to-day decision making and when compared to real-time data, supplies you with valuable insights into the financial health and performance of the organization. Armed with knowledge, you are able to navigate treacherous market waters and deal with inevitable revenue fluctuations.
So, be successful, proactive, and well-informed when steering your business. Stay on course to long-term growth and get ahead of the curve with strong winds in your sales.