By Rose Martin
If you’re trying to launch your own business, raising capital effectively and managing that money well go hand in hand. In fact, according to a study published by Bloomberg, 80 percent of entrepreneurs fail within the first year and a half of starting their businesses primarily because they run out of cash.
By getting a better handle on your financial situation, you will be able to avoid the most common financial pitfalls and smoothly get your startup off the ground. Here are a few tips that can help you raise money and maintain the financial health of your startup:
1. Plan smart and stick to a budget.
Unforeseen disasters can cause severe damage to your business; you want to ensure that you’re prepared for all sorts of risks. For this, you need to plan ahead for all situations related to your business—only then will you be able to deal with worst-case scenarios. Being prepared for contingencies will save you from a lot of hassle later.
Apart from planning, you need to take care of budgeting as it is the foundation of a sound financial plan; it can help you track cash on hand, expenses, revenue needed for growing your company, and meeting your business goals. Apart from this, it can help uncover hidden costs, thereby minimizing the risks to your business, especially cash drain.
Make sure to update your budget regularly, and ensure that it’s keeping with your business’s performance and growth projections.
2. Understand the ins and outs of your financial situation.
Financial literacy is an essential skills that an entrepreneur should have. Knowing exactly where you stand in terms of your financials will help you make sound decisions and increase your odds of achieving long-term success.
Get a grasp on your finances and organize all your financial documents. Doing so will provide you with a clear idea of your business’s performance. Moreover, it will help you identify problems so you can implement the necessary corrective actions and improve your operations.
3. Have a financial mentor by your side.
Running a startup has its share of pros and cons. However, having a competent advisor by your side can help you navigate a complicated financial landscape. A dedicated financial professional will help you grow your business by offering the right advice at the right time, including advice on the best investments for your business and assistance with employee compensation. When looking for a financial advisor, make sure that he or she is experienced and has the required credentials.
4. Be familiar with your sales cycle.
When running a business, you will have to deal with a number of tough situations; however, being familiar with your sales cycle will allow you to deal with financial ups and downs more effectively. Generating profit during your off-season can be a challenge, which is why it’s best to start saving during the peak. Also, amp up your marketing efforts early enough in order to expand your customer base.
Raising Money for Your Startup
Acquiring funds for a startup is no walk in the park. Moreover, if you’re not backed by an elite accelerator, the road to success can be difficult. Fund raising, when done correctly, can help you develop lucrative relationships with angel visitors and venture capitalists. Here are a few tips that can help:
- Research and choose a financing option (VC, crowdfunding, angel investing, etc.) that best meets your business’s needs.
- Invest time and effort to prepare a brilliant fund-raising pitch.
- Embrace the power of networking as it can aid you in developing your business more effectively. Meet potential investors and let them know about your business goals and how you plan to achieve them. Keep updating them about your plans from time-to-time.
In a risk-driven business world, finance management and raising funds can be challenging for a startup. Moreover, you will need to make smart decisions to navigate successfully through tricky financial waters. The aforementioned tips can help you get a grip on your finances and ensure that your money-raising experience goes smoothly. This will further allow you to reach your business goals and ultimately grow your bottom line.