Best Ways To Manage Finances As A Thriving Startup
So, you got your small business loan, you kick-started your entrepreneurial journey, and now your startup is operational. Now you’re probably thinking when you’re going to break even and when you can finally start paying yourself a salary, but before you can do that, you have to start managing your finances like a pro.
Only with meticulous financial management can you set your startup up for success and achieve your financial goals. And it all starts with a detailed business plan that will outline your financial strategies and the tactics you’re going to use to solidify your financial position. As a thriving startup, though, you need to get creative and think beyond mere cash flow projections and supplying the demand for your products or services.
You need to think about minimizing financial waste, maximizing productivity to save money, patching up costly security loopholes, outsourcing the right processes, and more. Let’s talk about all of this today and give you a clear roadmap that will help you manage your finances as a thriving startup in a competitive industry.
Leverage automation tools and business software
Automation is one of those buzzwords that gets thrown a lot in the modern business world, but it is something every startup leader should consider. In essence this is a broad concept that includes various technologies and solutions intended to elevate efficiency, minimize financial and time waste, and simply automate repetitive tasks so that your talented employees can focus on more complex processes.
Luckily, nowadays there is a piece of automation software for every industry, and a dedicated tool for every need. A property management company can use dedicated property management software to automate various tasks but also boost coordination between on-site and in-house teams, for example. An Ecommerce brand can use AI-driven chatbots to automate parts of their customer support department, while an auto body shop can automate the damage estimation process with a web-based application.
The possibilities for automation are virtually endless, so make sure to automate as much as you can to save time, money, and elevate customer experience.
Use more affordable lead generation methods
There’s a big difference between inbound and outbound lead generation - the latter is much more expensive than the former. And as you know, one of the key accounting tips is to pay attention to your major expenses. Not only that, but inbound lead generation simply generates more leads. Overall, inbound is a much more cost-effective method, so it’s important to choose more affordable strategies in order to save money as a startup.
For example, webinars are excellent for inbound lead generation, but the best part is that with the right webinar software platforms you can minimize financial waste, automate payments and booking, and avoid spending time and money on tedious tasks. The same goes for live events and other types of highly-engaging lead generation tactics.
These include long-form articles, user-generated content, social media posts and giveaways, influencer and affiliate marketing, and continuous search engine optimization. On the other hand, if you only stick with PPC and paid ads on social media, you will quickly burn through your marketing budget.
Test and choose the right PM software
Project management is a vital process in any startup, in any industry. Now that the pandemic has forced companies to adopt the remote work model, it’s more important than ever before to implement the right PM tool.
Why? In order to improve communication with your remote team, and save time, money, and sanity in the digital workplace. After all, you can hope to run your startup on email communication and a free file-sharing platform.
You need a robust PM tool to do all that and more, so it’s important to test out various software, avoid the ineffective project management tools, and choose a solution that works for you. Luckily, you can do this for free as many companies offer a free trial to get yourself acquainted with the software and decide if it's a good fit.
Needless to say, when you do find the right solution, you will immediately notice a rise in productivity, less time waste, and of course, higher cost-effectiveness for every process. Because remember, time is money, but so is the level of communication and collaboration between remote teams.
Ensure seamless and cost-effective scalability
Scalability is probably the most important word in your business plan. As a startup leader, one of your primary concerns should be to make your startup scalable, which means being able to scale up or down seamlessly according to market trends, supply and demand, talent requirements, and your financial standing.
Now, you’re an ambitious leader, and scaling startups with ambitious goals is not always an easy task, because it requires careful planning and strategizing. But here’s to do it in a few key steps:
Always monitor your operational expenses and aim to earn more than you’re spending
Make your goals reasonable and financially-viable
Find ways to expand your revenue streams
Consider possibilities for passive income
Plan your talent acquisition carefully and don’t hire unless necessary
Keep your workspace scalable by joining a coworking facility
Monitor socio-economic and market trends for accurate forecasting and demand sensing
Invest in digital transformation and adoption early on to ensure technological scalability
As a leader, ensuring scalability doesn’t just mean being able to scale up when you’re growing, it can also mean scaling down quickly to save money, retain service quality, and meet the current market demands.
Outsource lead generation and other processes
Nowadays, there are many processes in your startup that you can outsource to an external team. Why should you do that, you ask? Simply put, outsourcing is often a more cost-effective solution for startups because it keeps them scalable and reduces payroll expenses. After all, hiring a full-time employee will always be more expensive than outsourcing a task to a freelancer or an agency.
This is because agencies handle numerous clients, and can therefore keep their prices competitive. The most obvious thing you can and should outsource is digital marketing. Hiring marketing experts is costly and managing campaigns is resource intensive, but if you outsource online lead generation to an external team, for example, you can scale up or down quickly and keep your marketing expenses low over the long term.
The same goes for many other processes in your company that simply demand too much human-power and would yield high operational costs for your startup. From accounting and invoicing help to outsourcing HR and even sales and support, make sure to consider all of these in order to minimize financial loss.
Work with and managing gig workers
The gig economy is on the rise across the globe, and as a startup you should leverage global talent to achieve better results, and take your company to the next level. Working with freelancers, for example, has become the norm for many startups, but you need to manage that relationship wisely in order to create a mutually-beneficial and stable relationship.
You can start by choosing to work through the best banks for freelancers in order to minimize transactional fees and ensure compliance for your business and the freelancer. If the freelancer has a preferred banking institution, see if the terms are viable for your startup. If not, try to find a better bank for both parties.
If the freelancer doesn't have a preferred bank, you should be able to suggest one to them in order to minimize their expenses and your own. This kind of support will not only build trust between you and talented freelancers, but will also build financial stability.
Prevent costly cyber security problems
On a final note, whether you’re just now researching how to start a business, or if you’ve already kick-started your journey, it’s important to tend to key cyber security issues right off the bat. Why? Because it only takes a single cyber-attack to drive your startup into the ground, and not just by ruining your reputation.
A data leak or any cyber security disaster can completely ruin your finances, so you need to educate yourself on SMB cyber security and implement the right protective measures that will:
Protect your cloud IT infrastructure
Keep sensitive customer information safe on the cloud
Protect all business accounts in your company as well as customer accounts
Protect individual devices that your employees are using
Protect the company network as a whole through a secure web gateway
Implement cyber security training for your employees
Provide comprehensive data backups and instant recovery
Focusing on cyber security early will prevent costly problems down the road, but also allow your teams to work seamlessly and efficiently. And that is the key to better financial health in a startup.
Managing your finances as a startup goes beyond cash flow management and accurate bookkeeping. As a business leader, you need to find ways to minimize operational expenses, limit financial waste, and build your startup’s wealth through higher efficiency, productivity, and invoicing power.
To do all of this, you need to combine the right tools and technologies with strategic decision-making, and you need to always keep your hand on the pulse of the industry. With the right data in your hands, you will be able to future-proof your business and prepare for any global crisis in the years to come.