Startups can make you a lot of money but they can also fail. According to recent data, 90 percent of startups fail. One reason that they fail is poor financial planning.
If you don’t know what you’re doing with your money, you can easily spend it on frivolous purchases and high wages, leaving your business with nothing.
In this guide, we’re going to give you the financial tips that you need to run a startup effectively. Ready to learn more and be part of the 10 percent? Then read on!
1. Create Two Budgets
This tip may sound strange: why do you need two budgets if you’re only running one business. It’s to avoid that messy scenario where business costs and personal costs become intertwined, which can ruin your business.
Create a business budget, first off. This should contain information like:
- Expected costs
- Projected income
- Staffing costs
- Rent
- Client gifts
This will let you outline the amount of money that your startup needs if it is going to succeed. Then, you need to create a personal budget. This personal budget will contain all the usual budget necessities like rent, food, gas, etc.
Keep your business and personal budgets separate from the start. This is vital for good credit, too, which you should read more about while planning your startup.
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2. Recognize the Value of Your Own Time
As the head of a startup, your time is very valuable. If you spend all your time sweating the small stuff when you could be doing higher-value tasks, you’re wasting your money, especially since you’ll be paying yourself a wage. You and your business will both suffer.
Determine your hourly rate. Think about how much you would charge to do your job if you were freelancing. If you can hire a freelancer to perform certain tasks for less than your hourly rate, there’s no point in doing them yourself.
For instance, if you are a programmer with a $90 hourly rate, why run your own social media when you could hire someone to do it for $40 per hour?
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3. Run a Lean Operation
You may have dreams of a plush office filled with the latest tech. You may even be able to afford it. Yet you shouldn’t splash the cash on this kind of excess.
When you go to a startup’s offices and you see massaging chairs and the latest Macbook Pros, you should see waste. Why spend that much on unnecessary items when you’re still in the process of, well, starting up.
You’re far better off running a lean operation for your first few years. Buy cheaper laptops and lower-cost chairs, spend less money on the aesthetics of your business, and concentrate on the meat of your business: your staff and your product.
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Financial Planning Is Essential for Startups
By following the financial planning tips that we’ve laid out, your startup will be far less likely to spend itself into failure. Be prudent with your cash, and nurture your business into the next big thing!
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