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Money Talk: 5 Tips for Planning Your Startup's Financial Strategy
by Dixie Somers Tue, 09/13/2016 - 08:49
Becoming an entrepreneur is similar to becoming a full-time student. Your brain must fire on all cylinders every moment of the day. You will be learning all the time, if not from books, from your mistakes. One of the toughest problems concerning the startup community is generating enough wealth to remain financially independent. In this article, we will review six tips to create a financially sound strategy for your startup.
The pivotal factor in every business decision is risk mitigation. How do you accumulate the highest return for the smallest risk? This coincides directly with maintaining a proper financial strategy. The risk is inevitable in the business world and every startup undergoes different risks that pertain to their mission. As you finish the R&D portion of your business, begin to visualize what problems may arise.
Risk and Valuation
Many first-time startups do not understand how to value a company. This is directly correlated to the risk you propose as a startup. An investor will look at a few things:
- Revenue and Growth
- Customer Traction
- Reaching Profitability
- Competition/Leading the Market
After you factor in these components, you can estimate your value.
Stay Away From Royalty Investors
A startup must maximize its profits when they begin business. In an effort to mitigate risk, many investors will opt for a royalty deal, taking a percentage of money for each unit sold on an item. As a startup, the ideal situation is to reinvest all the earnings. This scenario downsizes the ability to grow dramatically by losing reinvest able revenue.
Implementing ERP Software
As technology continues to improve, business owners have better ways to mitigate expensive and menial tasks. ERP software is used as an application that manages and automates many back office functions. These functions include but are not limited to human resources, technology, and services. Visit a company like Practical Technology Solutions for more information.
Focus on Milestones
As a calculated business owner, it is imperative to list every objective you have for each quarter. This will benefit the business, your investors, and you. Focusing on the target and reminding yourself every day of what your goal is will increase the likelihood of reaching these targets. If you reach them on time, you can also showcase the achievement to investors.
There are many components to a successful business. These tips merely scratch the surface of a well-rounded financial plan. As your business continues to grow, learn from your mistakes and implement the strategies that will effectively mitigate risk.