If anyone is to ever name two things that are critical for startups, they would undoubtedly be ‘time’ and ‘money’. Both play a significantly important role in defining the fate of a new business. Gone are the days when people could afford to launch a new business with a relatively common idea and still make profits. Now, they can never expect to survive without a brilliant idea backed up by a failure-proof plan, as both go hand in hand. Business adventurists have a different set of priorities and they try to put their best of knowledge and skills to task right from the beginning to yield intended outcomes.
Why do New Businesses Fail to Survive in a Challenging Business Environment?
According to statistics, 3 out of 5 entrepreneurial business ventures fail to survive in the first year of their launch. The reasons may include lack of experience, knowledge, skills, expertise, managing critical business affairs like cash and inventory management, marketing, the strategic balance between demand and supply, etc. This indicates that the reasons could be internal as well external and one needs to keep a close eye and focus on changing corporate dynamics in order to ensure long-term survival in terms of profitability, sustainability and growth.
Capitalizing On Score Strengths and Avoiding Risks
Trust me! Starting a new business is no easy feat. Your thrilling adventure may turn into an awful experience if you don’t create and follow a unique strategy and execution plan. Moreover, entrepreneurial business ventures are often threatened by risks. In the core of every startup business lies risks and uncertainties. Those who are able to fight them well and capitalize on their strengths are able to achieve both their short/long term targets and business goals. With so much entrepreneurial knowledge and professional guidance, fighting against the odds has become relatively easier than ever.
Money, Money, Money
It wouldn’t be wrong to say that ‘money’ is one of the main reasons why most entrepreneurial ventures fail to survive long term. According to studies, the success or failure of any business is usually determined by how well they can manage their money. For any new business to survive and succeed for long, it becomes absolutely necessary to manage money-related tasks effectively—the better they are, the better the results! In order to avoid risks and uncertainties to a complete business failure and mismanagement of money, a solid game plan must be in place and priorities must be set.
5 Crucial Money Tips to Failure-Proof Your New Business
Manage Your Money
Starting a new business requires a hefty stack of hard cash. For ensuring a smooth flow of a financial life cycle, you need to keep track of business transactions on a daily basis in order to avoid discrepancies for the whole month. You must know your financial status exactly; the influx and outflow of cash. Since the beginning of our entire academic and professional career, we have been learning that profits keep the business running. However, we’ve focused little on the ‘effective cash management’ behind every successful business.
Entrepreneurs may have a fantastic idea to launch their new business but they usually lack cash management knowledge, skills, and experience quite significantly. Hiring an expert bookkeeper or accountant to manage money-related tasks is a smart choice for ensuring optimal results. This way, you will have a clear snapshot of your business’s financial status. Moreover, it allows you to focus on core matters of business, while your accountant takes care of the finances. Investing in a professional accountant will surely save your time and money in strategic terms!
Diversify Your Business
It is really important for any new business to keep itself up to date with the latest trends. Businesses fail to keep their competitive advantage and market share if they solely rely on old customers. The sole reliance on one single client is a secret recipe for disaster as you may never know when that big client might change their direction. When you want to keep your new business up and running, you need to evolve with time and find new clients to maintain and grow your business.
Don’t Overpay Your Taxes
This is a serious mistake often made by most start-ups when they unintentionally overpay their taxes. Tax returns must be filed very carefully and you must only pay what you owe, not more! It is better to procure the expertise of a professional accountant who may turn things into your advantage, which is a reduction in taxes. Any new business feels the heat to save as much as possible, so hiring the expertise of a professional will lower your concerns of mismanagement and calculation.
Know Your COGS and Margins
COGS stands for cost of goods sold, which refers to the total cost incurred on the goods produced and sold. It is critically important to know the total production costs of different products or services in order to set a price that will bring you significant rewards or returns. For example, if a product costs you $20, then obviously you won’t be selling it for $20. You will need to sell it for more in order to earn a return.
Time Is Money—Both Must Be Allocated Wisely
Any new business start-up has very little time to make a mark. Creating a perfect balance may be very hard in the initial phases of business development. However, for attempting things correctly the first time, you need to make a sensible judgment and realistic analysis for allocating time and money in your business. As you know, no business can survive for long without being productive, so you need to allocate your hard earned money and time wisely. This means that spending too many resources on a single person or employee can be dangerous for a new start-up, as you may never know when they may leave the organization.
In order for a unique business idea to survive and thrive in the market, money tips to failure-proof the new business can be implemented and applied to give the business more time to create an impact. It all starts and ends with an effective management of money—the better that is, the better the result!
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