The UK is a haven for entrepreneurialism. Startup businesses are a crucial part of the nation’s business – and employment – ecosystem, holding up industries and representing a deep well of opportunity for the bright and best. But with recent murmurings of another potential recession, it has become more difficult for the less financially savvy to consider starting up a business. What are some key financial considerations for a new business?
Understanding Startup Finances
To enact a proper financial plan for your startup, you first need to understand some fundamentals about startup finances – and the pitfalls that await a vast majority of new entrepreneurs. It is an unfortunate fact that capital, and a considerable amount of it at that, is necessary to get a new business off the ground; early funding is necessary to buy up the necessary stock or supplies, branding and marketing solutions, initial skeleton staff and the infrastructure to host them.
Even with the most robust of business plans, it can be difficult to truly predict the form and size of a business’s revenue streams. This, coupled with a difficult first two years of moderating expenditure against income, can make cash flow problematic. This is how venture capital and angel investment become vitally important initial streams of income, if at all possible to secure. But waiting for a high-value investor is not a shrewd solution. What, then, can you do to improve the form of your financial planning?
Budgets and Cashflow
The key to a strong financial plan is a good budget. Having a clear idea of the costs associated with each step in your business’ incorporation and expansion will allow you to allocate the funding you do have in the right places, and settle on your priorities – which, by the way, should be outward-looking.
The second consideration is an ongoing one, in the form of cashflow. Cashflow is a particularly important statistic to track, especially when it comes to securing outside investment. Failure to manage your cash flow properly will result in investor insecurity and can herald dark times financially. As such, ensuring investment of profits is kept to a minimum is an important consideration.
Administrative Investment
With expendable capital at a minimum, it can be difficult to justify several costs – particularly when it comes to personnel. Thankfully, some shrewd alternative investments can ensure that these administrative costs are kept to a minimum, without negatively impacting the business. A key example of this comes in the form of payroll software, an administrative tool that can minimize your staffing needs in accounting. This, in turn, frees up capital for spending outwards instead (an essential consideration for establishing your market footprint).
In Conclusion
Planning finances for the early stages of your new business is not a glamourous task, and can even be a little demoralizing. But proper thought put towards your early-days spending can ensure you get the most bang for your buck.