Statistics indicate that up to 1 in 5 new businesses fail every year in the UK.
Cash flow issues are among the most common causes. Managing money is a challenge for many aspiring entrepreneurs. If you are preparing to launch a business, or you have recently set up a company, this guide contains useful tips to manage startup costs.
Create a precise, accurate business plan
An effective business plan should contain detailed information about income sources, funding, outgoings and expenses. Before you commit time and money to a new company, make sure your business plan is accurate and precise and ensure that it covers every cost involved in setting up and running the startup. Your plan should provide answers to questions about how you’re going to fund the business, how much you plan to sell products or services for, how you’re going to generate profits and how much you aim to make year on year.
Brushing over the details can make your business more susceptible to cash flow issues down the line and it could also leave you short when you start paying bills and spending money to get the startup off the ground. Get multiple quotes from suppliers and businesses you plan to work with, compare prices, be prepared to negotiate and keep a close eye on your margins. Factor in all expenses, including the cost of buying materials, ingredients, tools or supplies, hiring and training staff, renting premises and covering taxes and utility bills. Setting aside an emergency fund is helpful for new business owners.
Search for ways to save
Setting up a startup can be costly, but there are often ways to save. From offers like affordable company formation from just £12.99 online to savings on supplies and equipment, marketing costs and logistics and delivery service packages, it is possible to reduce spending without making sacrifices on quality or customer service. Negotiate with suppliers to get the best deals, work with agencies and companies that cater to startups and small businesses and look for flexible options. You don’t want to be paying for services that you don’t use or features that you don’t need, for example. Before you make decisions, search for ways to save. Taking the time to compare prices and liaise with companies and service providers can save you a huge amount of money.
Use accounting software
Accounting software simplifies the process of bookkeeping and managing business finances. It’s hugely beneficial to keep a close eye on the books from day one to identify early warning signs of cash flow problems and get an accurate insight into how your income measures up to your outgoings. Running a profitable business doesn’t depend solely on receiving orders and taking money from customers. It is equally important to track expenses. To maximise the chances of generating profits, it’s wise to try to keep outgoings as low as possible without compromising on quality. Review statements and monitor transactions to identify areas where you could make cuts. Accounting software can also help you to prepare tax returns and it’s an effective means of saving money on hiring accountants or bookkeepers if you’re on a tight budget.
Streamline your marketing strategy
Marketing plays an instrumental role in helping business owners to attract customers and raise brand awareness. Marketing costs can spiral and not every campaign is successful. The key to managing marketing costs for a startup lies in streamlining a strategy to optimise the chances of reaching the right buyers and prospective clients. Focus on techniques and platforms that will enable you to connect with interested parties and create high-quality leads and make sure your campaigns are relevant to your ideal customer. Use analytics to evaluate performance and results and identify strengths and weaknesses. Choosing the right platforms, channels and methods can help to increase ROI. If you don’t have expertise in marketing, outsourcing marketing could make better financial sense than hiring employees. In most cases, when you outsource digital marketing, you pay an agency a monthly fee in exchange for a package of services. This often works out significantly cheaper than employing new members of staff.
Managing startup costs is one of the most challenging aspects of setting up and running a business. Cash flow issues are a common cause of new business failure. If you own a startup, or you are preparing to launch a new venture, it’s critical to understand the importance of money management from the outset. Create an accurate, detailed business plan, cost out every aspect of the business, look for ways to save and track spending. Consider different staffing structures, explore the costs of outsourcing versus hiring employees and streamline your marketing strategy to improve ROI.