Maintaining Financial Efficiency as a Start-Up
In the current economic climate every business start-up
needs to be aware of financial efficiency and how this can have a big impact on
future success. Making sure you keep a close eye on the purse strings starts
even before the business is founded and needs to continue well into the
life-cycle of the venture.
Early Research Reaps
Dividends
Many people going into business for the first time pay scant
attention to market rates and the level of competition they will experience.
They have a good idea for their business but they fail to do adequate research
to see if they can generate enough income to get them through the start-up
phase. This is why so many businesses go bust early on and obviously it is
something you will want to avoid.
Even if you have a business idea it is wise to look around
and see what other people have done in your field. Consider the wealth of sound small business
ideas that already exist and then think about how you will set yourself
apart. Will you compete on price, originality or service and what will your
unique selling proposition be? A company which thrives will always establish
early on their business concept; company mission; and both long and short term
objectives. It is these key decisions made at the outset which will guard your
business against potential financial vulnerabilities as you progress.
Accounts Are Not an
Afterthought
There are many ways to establish a business and various
forms of legal entity: sole trader, partnership,
umbrella or limited company amongst them. Whichever choice you make keeping
accurate records is a vital part of the process. At year end, when you need to
do your tax return, you don’t want to be chasing around for receipts from three
months earlier or finding that your personal accounts are mixed in with those
of the business.
Therefore, set up a dedicated bank account for your business
and get training on bookkeeping or preferably hire a professional to do your
accounts. It is important to know what expenses you can claim when you do your
tax return and so getting expert advice on this at the start can save a
substantial amount of money.
Be Open to Investment
It is not always necessary to struggle on alone in your
business when an injection of capital could make the difference between success
and failure. Whilst many start-ups shy away from investment there are numerous
options available. There is the traditional bank loan but this may come with
high levels of interest which might do your business more harm than good.
Alternatively you could look to the possibility of whether your business is a
fit for any government, European Union, local council or charity grant.
These are not easy to win, but neither are they impossible, so it is worth
investigating. You should also look into the angel investor
option. Angel investors are often willing to offer some level of mentorship to
help your business grow as well as a cash investment. Finally, there is always
the option of reaching out to family to see if they are willing to join you in
your new venture, either as investors or silent partners. Naturally with any
investment you will want to weigh up the pros and cons and make sure you aren’t
over committing yourself. However, it isn’t worth rejecting the idea of
investment out of hand as it may well bring many benefits to you in the first
year or two of your business.
Financial efficiency is a delicate balance between giving
your business the scope to grow whilst still keeping a tight rein on
expenditure. If you gain a strong understanding of the market in which you
operate it will help you to set your prices, establish your position as a
market leader and ride out the vulnerable early years of your business.