What drives many budding entrepreneurs is the idea of making money. Finances are the lifeline of a startup, so that makes sense, and there’s also the dream of becoming wealthy from a business venture you began from square one.
To make sure there’s enough money, ask yourself these questions before stepping on the entrepreneurial scene.
How Much Cash is ‘Enough’?
While you likely think that your business idea has strong staying power, there’s always a chance that it won’t succeed, unfortunately. So, be realistic and test out the concept before beginning the biz, so that you can see if customers will pay for your product or service.
Once you determine that the test went well, move onto estimating how much money you’ll need. Ensure you have enough funds to cover at least the first month’s expenses.
Creating an estimate of your monthly costs involves looking at what are the expenses, such as essential and operational. A common reason a lot of startups fail is lack of money, sometimes because of underestimating the funds needed monthly.
Where Will You Get Funding From?
Let’s assume here that you’re not a billionaire (although if you are, hats off to you!). If you have a finite amount of money saved up to put into the startup, that’s a great start. For additional financing, there are different routes to pursue.
You could ask the bank of mom and dad, other family members, and close friends for help. Or, attracting angel investors or a venture capital firm is another strategy. Create a professional office environment with workplaces customized to your needs that impress those who come to meet with you.
A bank loan is also an option, as is securing a grant from the government. Often entrepreneurs combine different funding sources to get their small business off the ground.
Can You Expect Income Right Away?
In other words, will the customer pay you right away for what you’re selling online or in-person? Some businesses begin by gifting free product to the target market to build interest and secure repeat buyers.
But the challenge there is that you won’t bring in money right away. While you will be spending money for marketing and production of goods, there aren’t sales right away to earn income.
If you use this strategy, make sure you have enough cash to cover the outlay to acquire a customer. If you meet with investors, have a monetary figure ready to tell them when they ask what the amount per customer is to get them to buy from you, as well as how much each customer is worth to your startup.
Where Will I be in ‘X’ Number of Years?
Finally, look ahead to plan out where you want to be from a financial standpoint in a certain number of years, such as five years from now. Having a goal helps keep you on track and hungry for what’s to come, as well as passionate about saving costs and making a profit.
Asking Yourself Questions
The questions above are important ones for entrepreneurs to ask themselves, regardless of the industry. Taking the time to think through the financial side of operations can save yourself a lot of stress and help the company strengthen over time.
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