So you finally took that plunge. You quit your job and put all your savings – including your brother’s investment – in your startup. You went through all the steps, crossed your Ts and dotted your Is. You are finally ready to take over the world!
But then, things start slow and your operating costs are through the roof. You thought the money you brought in would cover and now you are freaking out because you did not plan for this part.
Phew! Scary scenario, right? But it happens too often.
Did you know that 9 out of 10 (90%) startup businesses fail? That’s a mind boggling number, but it’s a reality. Because most entrepreneurs fail to adequately manage costs associated with their businesses, they run out of cash, and what was once a great idea becomes just that – a great idea.
After some research and discussion with newbie entrepreneurs, here are some great tips for managing your money when starting up a business.
- Necessity – Is your product/service really needed in all 36 states at inception? Do you really need a clothing store in the priciest neighborhood? It may seem like a great idea to launch on a large scale or dole out rent money for a sixth floor office space in a highbrow location, but is that really what your business needs at the moment? Don’t get me wrong, expansion is great however you have to crawl before you walk. Gradually introduce your product or service into the market, analyze market feedback, build a loyal customer base, and then look to investors to fund your expansion.
- Work Smart – Not every day work hard, most times work smart. Invest in an inverter system to save on diesel/petrol costs. Open later in the day on select days and public holidays to offset overhead costs. Do your parents have extra space at home? Ask them if you can use it as storage. Utilize your little sister during her summer holidays and coax her into being your sales executive. There are several ways to maintain quality and cut costs, make the best use of them.
- Leverage your network – Who you know does matter! As a startup, you need a strong network that can provide support and connections for your business! Remember Bidemi from high school? Well she’s a licensed CPA and can give you a few accounting tips. What about Chuka from university? He’s a great artist, and can point you in the right direction when you are looking for paintings for your new store. And your sister Segi? She’s a lawyer, and can look over any contracts and explain those big legal terms to you. Everyone matters! So look into your contact list and find skilled friends, ex-classmates that can offer you great tips for free! We all like free!
- Learn basic accounting skills – This point cannot be overemphasized! It costs little to invest some of your time in understanding income statements, expenses, operating costs, payment cycles and cash cycles. Although you can hire someone for the job, you need your employees to understand that you also know ‘what’s up’. Some of the best entrepreneurs still balance their books themselves at the end of each work day. It’s also a great way to monitor your cash flow.
- Avoid credit customers – Like a PLAGUE!! Kidding. (Not really). Although some of the greatest companies rely on credit transactions, remember you are a startup, and every naira earned is probably accounted for before it hits your account. So politely inform customers of your policy, and if they are still interested in what you are offering, they will buy! Offering discounts and making payments easy for customers also encourages good behavior! For example, a customer should not need to drive for 45 minutes to your store because you only accept cash. Get with the times and adopt alternative channels for payment! You can have your customers download the UnionMobile app on their mobile devices, or register on UnionOnline for internet banking.
- Get a reliable Bank – The bank you choose will determine how easy it will be to rest assured that your business will be supported. Choose a bank that understands you and your business and has accounts that fit into your lifestyle. With a UnionVibe account, you get to have all those benefits, and connect with other young entrepreneurs who share the same interests as you.
Images – pinterest.com/natwar86, quora.com, wanderlustmusingsnetwork.com