Is financial management important for a startup?

We live in the era of startups. Every day thousands of projects with unique ideas and proposals are launched all over the world. However, many projects reach the successful implementation of their plans, closing at the beginning or in the middle of the path. Launching and managing a startup is not an easy task. It requires strength, knowledge, and resources. Is it possible to succeed with limited funding? Yes, if you manage the available resources correctly!

Why is this important?

Competent financial management in a startup is one of the most important tasks of managers. There is a misconception that large funds are needed to create a startup. This is far from the case. At the initial stages of project development, the contribution of team members, proper organization, and efficiency of teamwork is more important. Therefore, starting a business without significant costs is quite possible. However, do not rejoice and relax ahead of time.

Without proper planning of financial costs, the situation of the project may worsen. In the end, this may even lead to the closure of the startup. Therefore, proper financial management is essential for successful development.

Statistics best confirm these words. According to the data, most startups close in the first year after launch. The remaining projects fail over the next 2-3 years. Only a small percentage of the total number of startups turn into sustainable business that continues to function and grow. Many mistakenly assume that such sad statistics are primarily influenced by project ideas. A lot of projects with interesting and necessary products/services were closed before they lasted even a year. Of course, inexperienced managers sometimes lack the skills and strength to implement their plans. Mistakes in organization and management also contribute. However, all of these are not the main culprit of failures.

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The main reason for the closure of most startups is the lack of resources and their misuse. Improper management of limited finances is the main reason for the closure of startups, even with the most interesting and unexpected ideas. Are you counting on the successful implementation of your goals? Great! Remember that you cannot do without knowledge about financial management!

Reasonable resource management – the key to successful development!

When launching a startup, it is important to determine for yourself what you’ll spend money on first. Even if you have attracted investments worth several million dollars, believe me, an unreasonable budget allocation can ruin your project. It is necessary to clearly understand for what purposes you’ll spend resources, and which will receive funding later.

To begin with, analyze the market, and your opportunities at the start, make a forecast of income and expenses, and start doing business according to the forecast. Your very first forecast will probably turn out to be wrong and will require revision very soon. It’s not a bad thing. At first, your forecasts will require regular adjustments. However, over time, you’ll study the market and learn how to manage a startup so that financial plans are fulfilled. A well-planned project is stable in the market. It is much easier for such a project to get investments for development.

Do not forget about the savings. Fortunately, today it is possible to avoid large expenses on the organization of teamwork by using corporate platforms and applications. Thanks to such business tools as Microsoft Teams, Slack, and Trello, you can take advantage of remote work. This is a high efficiency (with the proper organization), time savings (no need to spend hours traveling to the office and back), and, of course, cost savings. The introduction of corporate tools allows you to save a significant amount of resources on office rental. You don’t need to rent an office and pay for its maintenance. Moreover, business tools help to build work processes, increasing the chances of successful startup development. For example, Microsoft Teams has the necessary functionality for communication, document management, and information storage.

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If you don’t have enough tools, then just integrate the necessary IT services and use them from your workspace. Microsoft 365 business voice SMS will open up new opportunities for your business phone and allow you to establish communication with potential partners and customers. Clients are always a source of income and resources for the functioning and growth of a startup. Feel free to use modern digital technologies to achieve the desired success!

Mandatory expenses

The key expenses in a startup are the costs of production and promotion of your project. Therefore, it is better to direct all the saved funds to the development and promotion of the product/services. What costs will be mandatory?

  • Salaries of team members
  • Payment of outsourced specialists (for example, lawyers, accountants, etc.)
  • Equipment costs
  • Marketing and advertising costs

It is worth noting the waste of resources to create a project website and marketing policy.

Most likely, you’ll make a website for your startup yourself, but you should not skimp on design and usability. The website will be the business card of your project until the product takes its place on the market, so it is important to make it as convenient, stylish, and functional as possible.

Optional expenses

We are talking about excessive expenses, but they can be avoided with a certain approach. The more money you manage to save, the more you’ll invest in the promotion of a startup, which significantly increases the chances of success. What can you save on?

  • Office rental
  • Attending and organizing conferences
  • Using paid software

Where can I find additional resources for development?

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Experienced managers note that there are often not enough resources for successful development even with the right financial policy. With the launch of a startup, it’s worth thinking about where you can get the missing funding.

  • Friends and family. This is not the best option, as you can ruin relationships with loved ones in the event of a startup failure. Save this option for later. Nevertheless, it is not worth giving it up
  • Business angels. Private inverters often invest their personal funds in interesting projects
  • Startup accelerators. These are large companies with large finances, which invest in start-up projects. In return, they receive a part of the shares after the successful development of the project
  • Venture funds. Large investors who invest in profitable projects. It’s worth trying your luck here

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