Every year, lots of new businesses spring up in the US – suggesting that this really is a hotspot for start-up founders and the ecosystems which support them. But there’s another side to it. 90% of start-ups unfortunately do fail, and one of the most common reasons is running out of money. If you go into business as a start-up, then, it’s likely that achieving profit eventually is your major goal. Otherwise, it’s difficult to see why it’s worth it. With this in mind, this article will guide you through some of the main ways that a start-up can embark on a healthy and profitable success path.
Justify every dollar
Wasting money is a surefire way to financial ruin both in your personal and professional life. But what about if you don’t have the skills to recognize when it’s happening in your business? As a leader, it’s vital that you justify why every dollar you spend is spent in the way that it is. Do you have an oversized marketing budget that produces lots of likes and shares but no leads? Or you have lots of product team staff, but sales are too low? Any of these sorts of spending commitments can quickly ruin a start-up’s chances of profitability. Remember: you may only get this chance and these resources once, so use it wisely.
While the tight-knit communities which many start-up teams enjoy does mean that there’s something of a sense of collective responsibility, decisions on factors which affect income and spending are going to fall to a firm’s leaders in the end. Good leadership, then, is vital: founders should be all over their profit and loss sheets and other accountancy documents so that they can make sound operational decisions, and they should be able to identify and explain every cent which comes in and goes out. They also ought to know how far the firm is from a profit target at any one time. Bad leadership which misses out this kind of task, then, can lead to trouble.
Planning and foresight
Some founders can have their financial heads buried in the sand, or they simply discover that they don’t actually have the forward planning skills required to exert the necessary control over the company’s finances. Successful founders, including Chern Lee, have years of experience in the start-up world – and as Chern Lee says, a vision-fueled business plan is a good idea to follow if you’re seeking a successful exit. By confronting any threats to profitability as they arise and having the skills to avoid problems arising in the first place, then, founders can do their best to ensure long-term profitability.
With so much on a start-up founder’s plate, then, it’s no surprise that managing the money well can slip down the list of priorities quite quickly. But for a savvy founder or start-up team member, it’s essential to put cash flow management front and center. By remaining on top of the figures and working hard to avoid waste, though, many start-ups can – and do – go on to be profitable vehicles in the long term.