October 10th, 2016
That moment when the start-up business funds begin trickling into the bank…it is magical. Someone else believes in the dream besides just you to the point they are willing to invest in it. It’s an indescribable affirmation that something awesome is about to happen.
Do not lose site of the bleak truth: 90% of new start-ups fail. Yes, that’s 9 out of 10!
Guess what one of the biggest reasons for those failures are…
That’s right! The business ran out of start-up funds due to stagnant growth.
There’s one answer to where you should allocate start-up business funds right there. You should reinvest business funds into the company to jump start growth. A company that is growing and generating its own money will not fall in that 10% of failure.
What should you spend those start-up business funds on? Let’s talk about that!
Investing and reinvesting in your business are smart moves, but be sure you’re investing in the right things:
Chances are, if you’ve made it to the start-up business funds stage of things, you’ve done some ample planning. At this point, you should have a solid business plan that outlines a great set of goals for accomplishing your purpose. In addition to that, your planning should have included some market research. In the start-up world, you’ve got to be fairly certain that your idea is going to fly and that you have customers ready to buy.
Your business planning will reach far beyond these initial steps though. You should never stop planning and setting goals for your business. That’s something the 10% would never do. Don’t forget to adjust your business plan at a minimum rate of once per year.
That’s right, you’re going to need an accountant. In-house or out, you need someone reporting regularly on the state of your business funds. That person should also have the experience and education to guide you on big financial decisions and take care of taxes. Be accountable for your investments and know your current return on investment.
Get yourself a decent lawyer. You want one that is not going to charge you for services you don’t need, but can be on hand when you do need him/her. A lawyer can help you with all things legal and paperwork. This is huge if you have contract employees, to help you understand your LLC or Inc., and just be a general adviser when you need one.
Decide on salaries from the get-go. You don’t want to be fumbling around with this once you get your business up and running well. Paid people are motivated people. Be fair without being extravagant. Stick with the going rate or slightly above to remain competitive in the hiring marketplace.
In the same vein, don’t skimp on your own salary.
These are huge out there in this day and age. It’s difficult to build a business if no one knows who you are and what you do. The only one who is going to tell them is you. Build assets that do this for you. Have a professional website, participate on social media, and build your email list! Budget for this, and hire a top-notch person to handle it who can get the most bang out of your buck.
Smart investment of your start-up business funds in things like those listed above is wise. I’m sure a good amount of the 90% who failed invested unwisely in things like expensive software, flashy clothes, plush offices, too much staff too soon, and generally spending too much money before making money.
If it seems extravagant, it probably is. Just because the money is there now doesn’t mean you will make more to replace it. Use money wisely from the start and it will pay you dividends in the future. Think back to your business plan. If things go the way you hope, you should have plenty of money to dress to impress and create an environment worthy of your team a bit later, right? Be wise and wait.
Those start-up business funds can become sand through your fingers if you’re not careful. You must be frugal in the beginning. Start-ups are fragile and rare. Be in the 10%!