Your success at startup could be hiding in every cent that you spend. And you have to be extremely careful about exactly what you spend your startup funds on. Before you start forking over the cold hard cash, you need to ask questions like: Is this really necessary? Is it going towards generating revenue?
But one of the best questions to ask is: Am I being careful with my startup cash?
If not, then instead of spending your profits at the end of the year, you’ll be spending your time wondering how things went wrong.
Startup Costs Are Just The Beginning
Costs, even well after startup, are a peculiar animal. They have a way of popping their heads out of their holes at the most inopportune times. Also, there are so many costs that you may have not even thought about yet. Every business owner will tell you that these come along so unexpectedly and hang around like a creepy, drunk uncle at holiday parties.
However, if you’re careful, and make sure that every cent that comes out of your funding is well placed, then you’ll be building on solid ground. But if you’re loose with the funds, even when it may seem like everything is A-okay, then you are building a house on the sand. Just ask any startup owner from 2019 who lost their shirt when 2020 and COVID hit. If you’re not careful, then disaster can hit.
Tracking Every Startup Cent Is Critical…
… from before you even open the doors. A startup is the most difficult time financially to budget for, mainly because there is no historical data to pull from. Everything is happening spring fresh. Every single aspect from fixed costs, to variable costs, to sales is an educated estimate.
As a business owner, you have to keep track of where your startup money goes. Every cent of it. This may not be an easy or even fun task at all, but it is a crucial one. Tracking lets you know not only where you’re spending your startup funds, but also if you are spending funds wisely and in revenue-generating places.
Of course, before anything you have to create a budget. Have a look at this article from “the balance small business” online forum. In there, they mention how the startup budget is an essential step way before opening your doors.
Some things to think about before you begin:
- What do you need to open the doors of your business on the first day?
- What will your fixed and variable costs be on a continuing basis?
- What can you contribute to keep costs low (furniture, for example)?
- What can you get as donations from friends and relatives?
- What can you do without (pictures, decorations)?
Keep It Lean
When the revenue starts rolling it, the temptation will hit. This is a dangerous time. Once things begin to balance out from the initial phase, there may seem to be an abundance of funds available. Many lose sight of the fact that it was working in a state of being lean that made that possible.
This is also the time when sales professionals move in and strike. Many have already been watching your business, waiting for the right time. They may already know your pain points and start to dangle a carrot in front of you to get you to buy something you don’t need. Or something you may eventually need, but not at the moment. The seduction of growth can be intoxicating.
Keep in mind that all businesses are still in the startup phase for about the first five years or so. Some like to say two to three years. That doesn’t matter. What really does matter is that you do not try and fix a problem you don’t yet have. Have a look at your current processes and see what can be streamlined. Make that core solid before trying to get too big too quick.
Have A Receipt For Every Cent
This takes us back to track. Once you sit down with your receipts for every startup cent spent, you’ll get a clear view of your actual needs. How much is spent on marketing? Can we increase the budget there? What can we cut? Have we set aside two months’ worth of expenses?
You simply have to be strategic with every single aspect of your business. There is no way you’ll know what to cut when times get rough if you don’t know where the money is actually going.