Financial Breakdown and Advice for Start-Up Companies

In the early days of any company, finances are critical and the wrong decision can be catastrophic. If a start-up wants to succeed and grow, it needs to have enough money to keep moving forward – and enough potential to attract investors and other funding. Understanding your financial plan and projections from day one can help you develop a strong and successful business which is profitable and popular.

Companies which are now household names across the world were once small start-ups, struggling to get their break. Apple, Microsoft, Amazon and Google all started in their founders’ homes and garages, and relied on loans, second jobs and a whole lot of good luck to get off the ground. Getting going is tough, but if you have a product or service that people love and if you take care to make the right decisions about finances and operations, you could one day be the owner of a success story like the ones these tech giants have created.

Expert advice: use free tools to improve your profile and secure your funding

“Our days as a start-up company are long behind us, but we still remember the difficulties of those early days – and we learned lessons that we still carry with us now,” says Frugaa marketing analyst Nitin Y. “Our best financial advice to new tech and online start-ups is to embrace organic search in the early days. The value of those free click-throughs for a new company is extremely high, and organic search success is a good measure for the potential of a business.”

SEO guru and entrepreneur consultant Jayson DeMers agrees. “Entrepreneurs need to prove to investors the long-term viability of their company in order to secure funding,” he told Forbes recently. “Organic search traffic increases are a major factor in establishing current trends.” Make good use of social media as well, and update your blog regularly. The more free exposure you can generate, the higher your Return on Investment (ROI) will be. Your profile will also improve, and you will have a higher chance of getting the funding you need to expand.

Plan your spending in the long and short term

Costs for start-ups vary greatly. Hewlett Packard was set up with a budget of just $538, while GoPro had a starting fund of $164,000. There are areas that a start-up company should be spending money on, and there are also areas which can be cut back in the early days. Planning ahead is crucial, otherwise you may find all your funds are gone and your business grinds to a halt before it can get going.

Your new business needs to live within its means, so get ready to account for every single penny which comes in or goes out. One area that you should spend on is professional financial advice, because it can be invaluable in the early days. An accountant can arrange everything from tax registration to financial projections, so you can present a professional pitch to the banks when you seek funding – and you can avoid hefty fees from the tax office. The service can cost less than you might think, so you don’t need to spend a lot, and it could save you a fortune at the start of your new business.

Invest heavily in market research

One area you do need to pay out for at the start is market research. If your product or service is not viable, your business will never get off the ground. Making sure you have allocated a good proportion of your budget – some experts say as much as 20% of your overall start-up budget is sensible – to researching your market is a good step in the early days. If you can prove that your product is needed and valuable, you will soon start seeing investment funds roll in and you will be able to worry less about cutting back on spending.

Salaries and staff costs are more expensive than you think

Tech start-up Buffer recently released its monthly spending breakdown for the world to see, and in doing so it revealed which are its key areas of spending. Salaries accounted for more than half of the company’s costs, and this is true for many businesses. Not only do you have the real cost of wages to consider, but there are additional administrative costs associated with payroll. If you have a number of staff, you may also find a need for other staff to look after them – such as HR teams, first aid trained staff, fire marshals and maintenance orderlies. “If you need to take on staff, expect this to take up the majority of your early spending,” said financial consultant Kieron Daniels. “Most start-ups we deal with spend half or more of their budgets on staff costs alone.”

If you want to maintain stability in the early days, consider those key areas of spending: market research; marketing; staff costs; financial administration. All other areas can be cut back on if you need to, at least at the start. Look for free tools that can assist with your online presence, keep costs down with an online accounting and advice service, and keep staff to a minimum for as long as you can manage. Once you start making a name for yourself and picking up customers, you should find it easier to secure further investment and start your journey to success.

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ufabtb November 5, 2023 at 6:58 pm

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