Avoid Start-Up Risks with these Financial Measures

starting a business

People usually invest more time in planning a vacation and tend to ignore securing their future. The same approach people have when starting a business. As per a study, around 80 percent of new businesses fail every year where a majority of entrepreneurs lose their entire savings and shatter their dreams of becoming their own boss. While starting any business, novices often face the capital issue. However, if you choose to play safe by incorporating a number of financial measurements you end up reducing the start-up risks linked with your business venture. The below given financial measures would guide you to avoid a couple of risks pertaining starting a business.

Save one year of expenses in advance. To be at a safer side, it is always recommended to save an amount worth for one year of your business expenses in your bank before starting a business venture. This cash can prove like a shock absorber when your your plans go array. At the same time, the other important rule to follow is to update completely your spouse or partner about your monthly financial investments at least during the first year of the start-up. The best way to do this is to have half an hour of financial review meeting. This step is crucial because it would help you to remain accountable. Indeed for this you do not need an accountant partner or spouse, the idea here is your accountability. Without carrying out this check and balance system, a majority of start-up entrepreneurs enter denial mode, hide some fatal business news which generally erupts like a disaster at the end.

Proper Understanding of your Statements

One of the biggest blunders the new entrepreneurs commit is investing funds on chasing sales and clients. Instead they need to learn the ways of reading their financial statements along with understanding the methods of making business cash flow positive. The basic thing you should to know is to understand your cash flow all the time along with things like calculating the break even. It is very important to understand the day of any particular month of your break even where you stop the payments for everyone and simply end up keeping the money for yourself.

Back your Business with a Good Advisory Team

You need a competent advisory team as you are not supposed to carry out everything on your own. You can hire different professionals including attorney, banker, insurance provider, small business consultants and bookkeeper/CPA as and when required. If you cannot afford paying these professionals, think of accessing a couple of forums and groups in your community which render competent advice for free or at a very nominal cost. They just have to understand your business plan to prove their advice effective for your start-up.

If you are given an option to invest money in your business, you should spend into areas which can directly accelerate your sales. If no one walks inside your office from the front door, there is no point in repainting the walls. Further, you are not supposed to invest cash unless you see it in your bank account. No one can guarantee a deal unless you see people signing a business contract and you get the reward. A lot of things can mess around the deal before the contract is finally signed. Also, you are supposed to avoid spending funds on upgrades unless you are very sure of getting good returns in the near future.

Under Capitalization- one Critical Reason for Failure

You must be aware of the fact that you require one year working capital in advance apart from having one year of living expenses before starting your business. You need to strictly follow this principle before you went ahead with your start-up. Further, if you take on any business just because you are too emotional about any particular product or service without actually understanding the role of the previous owner then you have chosen to fail. It is best to segregate the role of the previous owner from the business role before getting it. These two roles are poles apart.

Do not Underestimate your Skills

In this discussion of starting a business the following point is probably one of the most important ones. Instead of underestimating your skills and abilities, try doing things on your own before you hire anyone for the same. In this way, you end up saving some percentage of your working capital along with inculcating a brighter vision and passion for your start-up. You can find huge amount of information available on-line, you simply have to explore them and try it out. Later, when you see a smooth kind of cash flow, you can then think of hiring any professional to refine your project.

Survey your Prospective Clients

Instead of putting yourself into any kind of guess work, it is advisable to ask straight about the prospect issues. This can be carried out by different market surveys among your potential and prospective customers. The program you develop should come with different price points from which the people can get the option to select.

The financial advice can certainly help you in reducing your business risks and secure more money in your bank account. Adopting these would certainly help you to embark on a success journey when starting your business.

About the author: Alyssa Clarke is a freelance blogger who is passionate about writing. She frequently writes on SEO, marketing and social media related topics. Her favorite sites are Gizmowatchand Bornrich, which she also happens to work for. She is a social media addict and can be actively found on twitter @alyssagclarke.

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