Did you know 50 percent of new startups won’t be in operation after five years?
If you’re in the process of building a startup, there’s no doubt the well-publicized failure stats are enough to give you sleepless nights. But you’re an entrepreneur. You don’t give up simply because other entrepreneurs have failed.
The good news is there are 5 steps you can take to give your startup a good shot at success. One of the most important steps is to create a solid startup financial plan.
Do you know how to create this finance plan?
In this article, we are sharing what you need to know about creating a financial plan that will help your startup succeeds.
1. Know Your Startup’s Goals and Objectives
The first step to creating a sound financial plan for your startup is to know your goals and objectives. In many ways, these have a direct link to your company’s finances.
For instance, if your goal is to rapidly expand and have physical locations across the country, you’ll need a lot more money than a startup that has no such immediate plans.
How many employees do you need to hire? If your business needs several employees right from the start, you obviously need a bigger budget.
Does your startup need to invest heavily in research and development? If yes, you’ll need to raise a lot of capital. Keep reading below to see just how a research and development department can be labor and cost-intensive.
Start by listing down your short-term goals and objectives, then medium-term, and lastly, long-term. Next, estimate the amount of money you need to finance those goals and objectives.
2. Develop a Funding Strategy
Around 80 percent of the businesses that fail do so because of cash flow problems.
Your startup needs to start off with an adequate amount of working capital in the bank. Even if you’ll be self-funding the startup, don’t assume that you’ll be injecting the cash on an as-needed basis. It’s important to put the capital in a separate account; otherwise, you risk spending it elsewhere.
What if you need to rely on external sources for funding?
Identify a method that’s ideal for your startup. You could choose between debt and equity financing, or a blend of both.
As a startup, though, equity financing is the most preferable since debt financing can put your company in financial pressure when it’s unable to meet its repayment obligations.
3. Find A Venture Studio For Your Startup
AI B2B venture studios are startup incubators that help you develop your business by providing funding, resources, and professional advice. They typically have a team of experts in various fields who can offer guidance on starting and growing your company. Many venture studios also have experience with artificial intelligence (AI) and can help you to create a competitive advantage for your business using this technology.
While AI B2B venture studios can be a helpful part of your financial plan, it's important to do your research before selecting one. Make sure to ask about the studio's success rate, what kind of companies they typically invest in, and what resources and advice they offer. You should also consider whether the studio's interests align with your own business goals. By doing your due diligence, you can choose an AI B2B venture studio for startups that will help you achieve success.
4. Financial Projections Are a Key Part of a Solid Startup Financial Plan
Listen to any startup owner speaking about their business and you won’t fail to hear them mentioning their financial projections, and for good reason. Financial projections are an indicator of profitability.
Your financial plan needs to include both near-term and long-term projections. How much money do you expect the startup to pull in within a year, for instance? What about your expenses during the same period?
Financial projections are especially important if you want to attract investors. They need to know how the startup will be fairing one, two, or five years from now.
5. A Sound Startup Financial Plan Is the Key to Success
You’ve probably heard that money is the lifeblood of a business. That’s true, and something you will be reminded of daily when running a startup.
However, money alone won’t do the trick. You need a good startup financial plan to boot. With this guide, you’re now in a better position to develop a sound startup funding plan.
4. Financial Projections Are a Key Part of a Solid Startup Financial Plan
Listen to any startup owner speaking about their business and you won’t fail to hear them mentioning their financial projections, and for good reason. Financial projections are an indicator of profitability.
Your financial plan needs to include both near-term and long-term projections. How much money do you expect the startup to pull in within a year, for instance? What about your expenses during the same period?
Financial projections are especially important if you want to attract investors. They need to know how the startup will be fairing one, two, or five years from now.
5. A Sound Startup Financial Plan Is the Key to Success
You’ve probably heard that money is the lifeblood of a business. That’s true, and something you will be reminded of daily when running a startup.
However, money alone won’t do the trick. You need a good startup financial plan to boot. With this guide, you’re now in a better position to develop a sound startup funding plan.
