When you decide to start your own business, it’s very exciting yet challenging. In a startup setup, every single step you take for fulfilment of your vision is important. So you have a vision with a fabulous business idea… you may from Marketing or a Finance background, but nothing prepares you for these challenges in advance. Here is some gyaan on few financial challenges I faced as a startup entrepreneur.
- Understanding Startup Costs: Most of us tend to underestimate how much starting a business will actually cost. For that a realistic business plan needs to be worked on keeping in mind all the hidden costs. Business registrations, Licensing, trademarks, CA fees, packaging etc. are all part of business costs too. Your vision for your startup and your business type needs to be clearly defined so as to ascertain the costs at micro level. Establish a budget and stick to it.
- Funding: Most of the time entrepreneurs start out business with a certain capital amount to take it to a level to attract investments & funding. While starting off, you need to make sure to have enough capital to take you to that level. Though getting a funding initially does provide you with some financial cushion with many different ways to funding from bank loans to private investors. For bootstrapped businesses like mine, we have cash flow but that too seems never enough to market your company to its full potential.
- Expenses: As new business owners, we often tend to underestimate our weekly/ monthly expenses. We tend to remember the bigger expense heads and forget micro expenses. You don’t need a fancy office to start with and can work from something budget friendly which fits in your business model. Also, hiring full time department heads in the beginning isn’t very budget friendly. In our online retail business, we have only warehousing & inventory in house while our accounting, marketing, website maintenance is all outsourced. Unless an expense is critical to your business or an investment with an expected return, cut it. In the beginning of business, keeping expenses low is the key to longevity.
- Pricing and Customer Acquisition: Businesses run with customers and we need to understand how to attract more customers at lower acquisition costs. There are many different acquisition channels available nowadays, but you need to figure out which one is better optimized to suit your business and easy on pockets too. As a startup, our online acquisition cost could be pretty high leading to lower profits. We need to be on lookout for low cost lucrative opportunities to reach out to more people. Once you scale, you can explore more channels depending on your budget. Right Pricing is another factor to consider while preparing your business plan. That can help you reach out to your potential customers in your niche market.
- Set Realistic goals: You may have a greater vision for your business. But sensibly breakdown this vision to smaller goals for a day/week/month and mark the costs involved alongwith it. This way you can keep a close eye on the growth of your business as well as have a clear picture of the financial goals.