5 Financial Strategies To Make The Most of Your Startup Budget
When you’re starting a business, it’s tempting to spend every last penny on getting your idea off the ground. However, running a successful startup means keeping your eye on the bottom line—and that means not blowing through your budget too quickly. If you have an existing budget of $1 million, for example, spending all of it in one month would be bad news because then you’d need to wait for more funding to start spending again. That might seem like an extreme example, but if you’re serious about growing your company over time, it’s important to think about how much money is coming into your business each month and how much of that can be spent (without going into debt). While there are plenty of ways for startups to save money (like using free apps instead of paid ones), here are five financial strategies that will help keep cash flowing in steadily without putting any strain on operations:
Prioritize Your Spending
You may have heard the saying, “You have to spend money to make money.” While this is true, it’s important to prioritize your spending so that you can make sure that the resources you invest in are going towards what’s most important for your startup.
When figuring out what’s best for your business, ask yourself: What do I need to spend money on right now? Will this investment help me achieve my goals? If not, then think about what is more important and how it will help improve my startup. Answering these questions will help guide your decision-making process when prioritizing how much money goes into each area of the business.
Finally, remember that there will be things that come up throughout the year which were not foreseen when setting a budget at the beginning of each month or quarter; but if all else fails ask yourself “what would happen if I just didn’t spend any cash?”
Learn to Negotiate for the Best Deals on Everything
As a startup, you’re likely to have a smaller budget for your business than the large corporations you compete against. That means everything—from your product or service to office space, marketing materials and even your website—is going to cost more than if you were working for an established company.
While it might seem like a no-brainer to negotiate on these purchases (and it is), there are still some important things that can trip up even experienced negotiators. Here are some tips that will help ensure you get the best deal possible:
- Be prepared before entering into any negotiation process. Research other businesses in similar industries who have purchased similar products or services; how did they do so? What did they pay? What features did those businesses want that were not included in the final package?
- When negotiations fail at one level, don’t give up! Often times there are other individuals involved in making decisions about things such as price or purchasing supplies/services from vendors we haven’t tried yet so continue talking with them until someone agrees on something advantageous for both parties involved.
- Look for office space in rising innovative cities. These areas will offer better access to funding, higher quality job candidates, and other benefits for your business. Since some of these areas are up-and-coming, the cost of rental spaces could be lower than in traditional business areas like New York and San Francisco.
Cut Down on Unnecessary Spending
Look at your budget and see where you can cut back.
- Review your expenses and look for any unnecessary spending.
Look at your employees and see if they really need to be on the payroll (are they high performers? are their skills in high demand?)
- Look at office space, and make sure it’s a good fit for what you’re trying to accomplish. If you’re working out of coffee shops or conference rooms instead of having an actual office space, then consider whether that’s going to work for long-term growth or not.
- Review your marketing strategy—do you really need all those ads? Are there cheaper options available that will get the same results?
Do you really need to be spending money on those fancy coffee machines or snacks for your employees? If not, then consider getting rid of them. It’s better to spend less money now and have a profitable business than it is to keep spending beyond your means just because you can afford it right now.
Start Saving Money Early
Setting up a savings account and making regular contributions is one of the best things you can do for your business. “It’s important for startups to start saving money as soon as they have any,” says Robert Ogle, founder of Bearfoot Management Group and author of “Startup Boards.” For one thing, he says, there are always surprises: “You could lose a big client or get sued or have other unexpected expenses.”
Another benefit: A savings plan gives you a sense of control over your financial situation. And that’s especially important when starting out because there’s so much uncertainty in running a business—especially regarding cash flow and income patterns.
Consider an Angel Investor
Angel investors are high-net-worth individuals who invest their own money in startups. They typically provide early-stage capital to help companies grow and prosper, often times becoming an important part of the company’s board of directors.
One way that you can find an angel investor is by contacting a venture capitalist firm and asking for advice on how to find one. Many VC firms have lists of potential angel investors whom they have worked with in the past and would be happy to give recommendations for your startup.
The benefits of an angel investor include:
- Easy access to capital – Angels will often provide funds without demanding equity or other control over your business like banks would require (though there may be some strings attached).
- Expertise – An experienced angel might have invaluable knowledge from years of experience that could help guide you through difficult times when making business decisions (like when hiring staff).
- Networking opportunities – Having connections at events such as conferences, workshops or seminars can lead directly into new partnerships or even customers down the road!
You don’t have to break the bank to keep your company afloat.
You don’t have to break the bank to keep your company afloat. There are plenty of strategies that can help you make smart financial decisions and avoid unnecessary spending, while also negotiating for the best deals on everything from your new office space to your services. You may even be able to start saving money early and save some extra cash as a backup in case things go south. And if worse comes to worst, consider an angel investor who has a vested interest in seeing your business succeed.
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