With every New Year comes the opportunity of a new beginning. The cyclical and symbolic nature of this event brings the perfect moment to get rid of what is not working, focus on improving what is working and setting new goals for your startup.
Here are ten points to keep in mind when organising your startup’s finances in 2020.
1. Cash flow is almost everything: learn how to manage it more efficiently
Running out of funds is one of the most common drivers behind startup failure. You need to know where your money is flowing from and to, in order not to risk surprises that might kill your company.
Budgeting is possibly the most underestimated activity. Not just putting numbers on a spreadsheet or a sheet of paper. How many of you have periodically revisited the numbers your team forecasted at the end of last year?
When your startup has a tight budget and shallow pockets, you are seeing it every day, but when you are in profit mode and more relaxed, that is when most of the cash flow accidents occur, by overspending and underscoring the revenue forecast.
Establish your budget, monitor and control it every day or week, depending on your industry. Buy in better conditions – one of the keys to start mastering your budget forecasts. Stick to your budget, revisit the spreadsheets with your team and compare real numbers with projected numbers. It takes years to polish this diamond.
Work around cash reserves and spending control to overcome seasonal times where abundance is not the rule – every industry has such periods over the year.
- Establish ambitious but reachable financial goals
Breaking down financial goals into smaller steps that are realistic and that the team can grasp, rather than setting the nearly impossible goals is more efficient than just ‘inspiring irresponsibly’.
Constant revenue allows you to grow organically and adjust the action plan in case something falls out of the forecasted results. Get control tools and wherever possible, automatize this monitoring so that you and your team can think of insights and follow-up actions based on the data you get.
- Limit your fixed expenses in the beginning
When you start any business, and you are not invested in by people who want to burn money and grow at any cost, one of the fundamental things to do is keep expenses low.
The majority of your capital should go into sales efforts, marketing and product development, otherwise, you won’t be able to breathe as a company and that is selling your product or service. Without sales, you can’t survive long.
Generating revenue is your main mission to survive as a startup. Being cool isn’t. If you can do both – congratulations!
- Your time is your currency – do not waste it
Time is money. This is one of the most powerful sentences in entrepreneurial culture. You cannot offend money nor time, as none of them accepts offenses from others. Thus, do not waste any of them.
Keep it simple and always ask yourself whether you are talking too long on the phone with a supplier, client or team member, or if that one meeting needs to be that long and stop it as soon as the results are obtained – or when you see there will be no results at all.
- Track all your spending
Although this might be seen as a continuation of item 3, it deserves a whole item itself. There is never enough advice on tracking all your spending and monitoring when we are talking about your hard earned money.
The use of a Business Finance Manager or an Enterprise Resource Planning software, depending on your industry, can automatize part of this task and give you more power, faster, stop money drain and improve your cash flow commitments (item 1).
- Focus on customer acquisition
Scaling customer acquisition is another fundamental resolution you need for next year. Unless you already have something stable in this area of sales and marketing, devote more time and find out where your obstacles are.
What are your sales and new client acquisition channels today? How much you spend on each of them? How much return does each channel give you? When was the last time you revisited this strategy with your sales team? What is your acquisition cost per new client?
After mastering this part, focus on the clients already bringing in revenue as this has lower risk and cost than new ones – and offer all of them the best service you can, or retention will not last.
- Get paid by your startup
Be sure to pay yourself enough to live within a level of basic comfort as this will support your mental health and give you part of the energy you need to build your business. Do not over compensate yourself or your team, but be honest with them and negotiate an amount every shareholder can take monthly so that they continue engaged in the operation and committed to success, rather than looking for other opportunities and thinking of leaving.
Most likely in the very beginning you will need to sacrifice your salary as most founders do, but as soon as there is some stable cash flow and sales, think about establishing this item in your resolutions.
- Be optimistic but brace for accidents
You can never exactly know what is going to happen when starting a business, so it is best to be prepared for accidents along the way.
Keep some reserves, both personal and business. You can never be too prepared for bad situations. Sadly, they do happen and often when you least expect them.
- Increase and improve your digital presence
Indirectly, item 9 will do your company a favor and grow the interest for your services and products. Create a marketing list and user-based, content-driven communication. Start a newsletter for visitors that come back to your website and get to know about new products, trends in your industry and the market in general. Maintaining a regular presence on social media can bring you valuable clients and partnerships that could not be reached otherwise.
- Improve communication
Efficient communication is golden. Misunderstandings can put a lot of unnecessary pressure on employees, management and founders. It also affects how the startup performs overall.
In a nutshell, your communication can improve your revenue, or even bring your financials spiraling downwards. Cherish all levels of communication and your probability of having a good year will be multiplied. This must be a team commitment, not only yours.
For these resolutions to work, you have to be revisiting them every week of the new year and asking yourself – how can I make this better than last year? They cannot only be resolutions on paper, but guidelines for loss prevention, stability, growth and a happy 2020.