From my experience of working with new business owners, I know that Entrepreneurs tend to be enthusiastic and optimistic with a rosy vision of what the future holds for their business. I guess this is only natural, after all, who would put their time, money and energy into a business if they thought it would fail? Whilst this positive outlook is a common trait amongst start-up owners, it can potentially also be a downfall, particularly when looking at the financial projections for the business.
Research undertaken by Bloomberg suggests that 8 out of 10 businesses fail within 18 months of opening due to running out of cash. Don’t let this happen to you! Here are our top tips to make sure you stay on track.
- Be conservative – double the lead time to profitability.
From working with start ups and indeed, having a business of my own, I can tell you it WILL take longer than you think! Being conservative with your projections will help ensure your plans remain realistic and importantly, make sure you have adequate cashflow to see you through any leaner periods.
- Push your team relentlessly
Any good start up owner knows that they must get the most value from the minimum resource. Hire and surround yourself with good people but DO NOT recruit more until those people are stretched. It is better to work with a lower level of resource than to hire more and risk redundancy at a later point.
- Get sound financial advice
It sounds like a no brainer but at Leading Strategies we spot the same common mistakes being made over and over again. Having somebody who can support your plans but challenge your numbers will keep you on track for success.
- Always have a contingency
In the same way that it is likely you will have a fighting fund to cover any unexpected costs in your personal life, your business also needs its own dedicated pot. Having a ringfenced fund will ensure you can deal with any surprise costs or cover shortfalls if they occur. You never know when the economy will change, this will give you room to breathe.
- Take care of the pennies
As a new business owner, every penny counts. Get yourself a great, cloud based accounts package so you can keep track of your finances whenever and from wherever you choose. But, don’t be so focused on counting the pennies that you miss opportunities for growth through investment. Sometimes, as they say, you do have to speculate to accumulate.