There has been an influx of people quitting their jobs today and starting their own businesses. With the hope of becoming the next Mark Zuckerberg or Jeff Bezos, they have dollar signs in their eyes as they dream of financial riches. However…
The truth is sobering. According to this article, 20% of startups fail in the first year, 30% in the second, and 50% after five years. And why do so many startups fail? For many, it’s because of poor planning and a lack of financial resources. So, rather than a rags to riches tale, the story for many startup owners is a far poorer one.
Thankfully, the risk of financial failure can be alleviated. If you’re a burgeoning startup owner yourself, you might want to consider the following.
#1: Reduce Outside Funding
When acquiring a loan for capital, many startup owners begin their time in business in debt. This can be problematic, especially when they don’t make enough of a profit to make those loan payments on time AND pay their business expenses. Rather than applying for a business loan then, you might consider putting more of your own money into your business at the outset. The more money you are able to save and use as business capital, the less you will need to loan from a bank or other type of finance company. You might also consider the next point.
#2: Don’t Give up the Day Job
If you’re still working, it makes financial sense to scale your startup slowly. Start small while still working for a regular employer, and only give up your job when it makes better financial sense for you to do so. This way, you will have still income coming in to put into your business and pay your bills, without the risk of a financial struggle in both your business and personal life.
#3: Find Ways to Reduce Your Startup Costs
Especially when starting out, it makes little financial sense to pay over the odds for your business necessities. Where possible, you should cut down on your business costs by finding more cost-effective solutions. So, instead of renting or buying office space, for example, you might want to work from home. Or if working from home is difficult for you, you might consider sharing office space with another startup owner or looking for the best interest rate on a commercial mortgage. And when purchasing office equipment and supplies, you should shop around suppliers, looking for discounts and cheaper sellers before splashing your cash on items that may put a dent into your finances. Follow these principles for all of your startup costs.
#4: Hire an Accountant
To ensure you don’t get into a financial muddle, turn to the experts! An accountant will help you budget the money you have at your disposal, give you advice on financial forecasting, and will ensure you follow the proper tax regulations to stay compliant. Especially when your skills with finances are limited to nil, an accountant will keep you on a steady path, helping you navigate your business towards success rather than financial failure.
With 50% of businesses destined to fail within five years, you might assume your startup could be one of them. On the other hand, 50% of business continue after five years, so be optimistic about your chances. By being financially smart, you might just become the next Zuckerberg, Bezos, or any other entrepreneur who has inspired you to consider a startup. Follow our suggestions then, and seek further advice to ensure your business gets off to a cracking start.
We wish you the best of success in your endeavors!