Startup success doesn’t come cheap. The costs add up in time and of course money. However, there are frugal ways to keep finances in good shape when pre and post-startup launch. After all, the second biggest reason startups fail is lack of funding.
Here the top five frugal financial hacks to ensure your startup won’t become a failure statistic.
Budget And Keep It A Priority
It is important to get a budget in place, since the second biggest reason startups fail is lack of funds. Even if you know there is a market for your product or service, market being the number one reason startups fail, without a budget spending can get out of hand quickly.
As a startup founder, you should be diligent about finances. One of the best things you can do is watch every buy down to the penny. If a purchase pops up, ask yourself how the buy will boost startup growth and success.
If budgeting seems a bit challenging, or if you don’t have much financial experience under your belt, especially in the space of business, you can employ online tools to set and keep your startup budget a priority. You can also lean on the expertise of a financial advisor to ensure your budget has legs.
Expect The Unexpected
There are plenty of unexpected expenses that can surface in the early startup stages. From costly tech issues to broken equipment, you need to be ready to cover expenses at all times. This makes having emergency funds available vital to the success of your startup.
There are different ways to look at emergency funds. You can literally have liquid cash in a bank account set aside just for unexpected expenses. Another type of emergency funding you can have readily available is a business line of credit.
“A business line of credit provides flexibility that a regular business loan doesn’t. With a business line of credit, you can borrow up to a certain limit, say, $100,000, and pay interest only on the portion of money that you borrow,” explained Steve Nicastro of NerdWallet.
Start Your Startup With Low Overhead
Low overhead is a financial must for startups that want to have long-term success. To keep overhead low, it’s best to be as frugal as possible. For instance, when developing your website, try not to get expensive hosting and all the add-on features a hosting provider will serve up prior to checkout.
Most startups begin with a shared hosting service or virtual private server (VPS) service. However, before you lock into a plan, know the difference between shared and VPS hosting.
Another way to keep overhead low is to avoid buying or renting anything that might not be needed right away. For example, if your startup consists of three people, renting an office space might not be the best choice. You can possibly work from a co-working space, library, or your kitchen instead.
Pair Business Goals With Financial Goals
In the beginning stages of your startup, you should have both business goals, like growing lead generation, as well as financial goals, like turning a five percent profit. If you can pair these goals, you will have a frugal financial startup strategy that kills two birds with one stone.
In the goals example above, you can strategize the ideal ROI on your lead generation campaign with that five percent profit in mind. Having monthly projections in mind is an excellent way to stay on track to achieve those goals is also beneficial.
“By comparing your actual financial statements to your projections, you’ll be able to see if your business is consistently falling short of your projections or surpassing them,” RievaLesonsky of QuickBooks explained.
Lastly, always hold yourself accountable to your goals, whether they are financial or otherwise. If you simply can’t hit the mark, don’t just forget the goal. Really explore the “why” and make adjustments until you surpass the goal.
Don’t Forget To Get Paid
It may seem slightly selfish to think about paying yourself, but it is an absolute must. Many startup founders will build stress over money. Make sure you reward yourself for the hard work you are putting in. Put yourself on the payroll and stick to it.
With that in mind, don’t pay yourself too much. You want to calculate what you need to live comfortable, just as if you were working a regular 9-to-5 job. This can keep financial stress at home to a minimum, allowing you to stay focused on startup success, not on debt.
Wrapping Up . . .
When it comes to startup finances, be frugal. There’s no need to purchase the latest and greatest tech, office space, and other unnecessary things. Start small, create a budget, and make smart financial decisions that will ensure your startup grows to be a successful business. What financial tips work for your startup?