How to Ensure Your Start-Up Company Doesn't Run Out of Money
When it comes to start-up companies, the statistics can seem quite grim. Unfortunately, here in the UK and, quite frankly, most places around the world, success tends to be the exception rather than the rule. Even when you go in with a great idea, product, and business model, you're still going to be faced with many challenges. One of the best ways to improve your odds of success is to understand what the most common cause of failure is – and it’s really quite simple. The majority of businesses that fail have done so because they have run out of cash.
So, how can you ensure that your new company gets off to a good start and doesn’t run out of money? Here are some tips that may be able to help.
Keep Careful and Meticulous Records of Your Cash Flow
Part of the reason a business may end up on the brink of failure and out of cash is because it hasn't kept track of its cash flow. This means the amount of money flowing in and out of the business. To do, this you need to be keeping track of all payments, receipts, and a daily bank balance.
Cut Back on Expenses Where Possible
Another factor that can eat away at your funds is expenses. Sure, you can't eliminate expenses altogether, but you can do your best to cut back wherever possible. Some of the more common areas where businesses can make cuts, or at least reductions, include reducing the amount of electricity they use and switching to energy-saving LED lights, running with as few staff as possible without making sacrifices to the business’s operations, looking for lower cost software options, whenever possible use digital files to cut back on printing costs, and making sure your list of receivables is always low.
Don't Wait Until the Last Minute to Get Funding
By tracking your cash flow, you should be able to predict if and when you are going to run out of cash. If you see it happening in the future, then it's wise to secure funding as soon as possible. You don't want to wait until the last minute and end up having to close the door on your business while you figure out the funding.
For small businesses, there are a number of different credit and loan options worth looking into. These can include a line of credit, a merchant cash advance, or a business loan. Each has its own list of pros and cons, so make sure you have enough time to research them and speak to the lender in depth.
Stay Informed and Be Prepared
Running a business is no easy feat and with challenges that pop up all the time, it can feel like an uphill battle most days. Running out of money is a very real concern, but by staying informed of your company’s financial situation and being prepared to get help with funding, your business has a much better chance of survival.