In India, most of the young folks often opt for three options in order to escape from their boring jobs. Either they aim for higher studies in their respective field or they opt for an MBA or they decide to open a company of their own. Each of the three stated career options is typical and tough. This article describes the problems faced, in the financial sector, by the people who decide to start their startup. It is true that every big company and business giants were once a small startup. But the owners have been intelligent enough to cope up with the challenges faced at their early stages. Presently, thousands of startups are being closed every day. The reason being a lack of funding or investment. So, you need to be very calculative regarding the amount of investment and the areas of expenditure of your startup. Here are the 5 ways where the financial mistakes you make while starting startups:
Startups – Financial Mistakes
1. Avoiding a budget
Of course, the budget is the main criteria in the upbringing of any organization. The prime motive of you, as a CEO, should always be capital allocation. You should be disciplined enough to make the respective allowances while spending money or fixing budgets on the various sections of your startup plan. Focus should always be on cheaper output and higher input. It is also important for you to separate your personal finances from that of the business related ones.
2. Differentiate between profit and cash flow
Business is actual for of accounting and cost budgeting. Each of the transactions is recorded and profits are calculated on each level so as to prevent from local dilution. Time and effort are the two main factors that the entrepreneurs need to allocate on the basis of the extent of their startup. Unnecessary cash outflows should be reduced and you should always be in the search for wider and stronger networks for the upliftment of your startup.
3. Underestimation and overestimation
You must be an optimistic enthusiast if you want to succeed in your position. But you should not overestimate the revenues. Also, an underestimation of the costs can lead your startup to be a dangerous position. Hence, it’s always advisable to study the market demands and the other competing factors and prepare estimation somewhere nearer to the perfect one.
4. Too much loans
Depending on the diversity of the startups and their bulkiness, you ensure to take a loan from the banks. Remember that banks aren’t responsible for the result of your startup. Be a success or a failure, loans are to pay back with the prescribed interests. Hence, make you don’t dive in a condition of endless debts. Manage your finances accordingly and keep backup plans ready.
5. High fixed costs
Fixed costs include the costs which you have to bare if you are looking forward to a startup. Office rent, employee salaries and mortgage payments fall under this category. This depends on the location of your office, the facilities you are providing to the employees and the strength of the skilled and unskilled workers present in your startup. Make sure your startup fulfills the need of the working environment of your employees, yet keeping the fixed costs as low as possible.
Hope you find this helpful. You may also take the help of various startup sutra described by some famous businessmen who were once in your position at some point in time. All the best for your future!