Most entrepreneurs are all too familiar with the rather depressing failure rate of startup businesses; research by Investopedia found that 50% fail by their fifth year. The same study found that one of the top reasons for this was that money simply ran out. In order to protect your startup, you need to keep a close eye on your expenditure and stay within budget. Here are six ways to use your money more wisely and stop burning through cash like there’s no tomorrow.
Hire an Accountant
It will feel like an expense you can do without when you are starting out but an accountant at the outset is a wise investment. If utilised properly they will do more than just calculate your tax returns. Most good accountants can offer business advisory services and can help you manage your cash flow and plan ahead while steering your business to success and avoiding many of the common pitfalls of starting up a new venture.
Start Small
Launching a startup is incredibly exciting and as a passionate entrepreneur it’s only natural that you want to go in all guns blazing but consider starting small instead.
Limiting your initial outlay allows you to gradually increase your spending as you gain skills and experience that will boost your chances of success. Increasing your spend on equipment in increments, allows you to review the effectiveness of each stage and make informed decisions on how to proceed. This way, there is less risk involved and you won’t burn through cash as quickly. Talk to your accountant who can advise you on how to finance new assets, save money and increase cashflow.
Equipment Leasing or Loans
Purchasing a lot of brand-new equipment outright will make quite a dent in your business budget, which is why you should consider a lease or loans.
Equipment leasing means renting equipment for an agreed-upon period, often with the option to buy or upgrade at the end of the contract. This is a particularly great option if your equipment requires regular upgrades or if you only need it for a short amount of time.
Equipment loans allow you to purchase the equipment but pay it off in manageable installments, which is great news for your cash flow. This agreement works in the same way as a traditional bank loan but it tends to be lower risk.
Resist the Lure of a Fancy Office
Every entrepreneur loves the idea of a flashy office with funky furniture and eye-catching artwork, but you certainly don’t need this to succeed. Don’t be drawn in by the idea of an Instagram-perfect office, because this could be a serious drain on your budget. Instead, consider purchasing second-hand furniture and equipment to keep costs low. Yes, brand new luxury office chairs would be nice, but they’re hardly a necessity.
Focus less on how your offices look and prioritise creating a comfortable environment for your employees. In the long term, your employees will be more productive if you have a quality heating and cooling system than high-end desks. It’s also worth investing in eco-friendly features such as insulation blinds and hand-dryers, as these will save you money in the long run.
Outsource
Hiring is an expensive and time-consuming process, so you may want to consider outsourcing certain tasks to another business or freelancer. This is a far cheaper option than hiring a full-time member of staff and you can often scale the service up or down according to the needs of your business.
Monitor Cash Flow Carefully
Cash fuels your business. Without it, you’ll soon arrive at a standstill. It’s important to keep a careful track of your cash flow from day one to ensure that you always have enough funds to continue operations. One of the best ways to do this is to prepare monthly cash flow statements so that you can see exactly how much is going in and out of your business and identify areas for improvement. This can be a time-consuming task, so it’s worth seeking the help of a professional accountant who can manage your cash flow whilst you get back to running the business.
Summary
The best way to stop blowing through your startup budget is to be frugal and take careful, measured steps when growing your business, rather than risking all your capital by making one huge leap. Whilst it’s only natural to nurture big dreams about your new business, try to focus on what is strictly necessary so that you can balance financial conservatism against growth. Secondhand furniture may not seem particularly glamorous right now, but flashy offices will be of no use to you if you run out of money.