Money Tips for Startups by First-Time Business Owners

Money Tips for Startups by First-Time Business Owners

Startups often fail because they run out of cash. Raising money can be tough for even the most seasoned entrepreneurs. If you are a first-time business owner, the challenge to find funding and write an effective budget is even more daunting. It’s important to research and learn from entrepreneurs who can offer money tips for startups. By learning from the mistakes of others, and making smart decisions around money, you will improve your new venture’s prospects. 

Cover Common Costs

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There are articles all over the web about entrepreneurs building multi-million dollar businesses with little or no money. While it may be true for some, and tempting to try as your business idea burns a hole in your pocket, it’s best to factor all possible costs. First, run a market analysis to see what the current trends look like among comparable businesses within your market. Ensure the funds are there for the essentials. Then add some breathing room in case unexpected costs crop up in the first 6-12 months. Here are some common costs every first-time business owner needs to have covered in their business plan and budget: 

Technology, Software, and Equipment 

Depending on your business, this may take up a large chunk of your budget. Computers and software needed for yourself and any other business partners can add up quickly. As money tips for startups go, this is at the top of the list for a good reason.

Payroll for Employees or Contractors 

While you may be happy taking little or no salary to get your business off the ground, your employees or contractors will be expecting competitive pay for their work. 

Research current pay rates in your industry and the roles you need to hire. If you offer great pay and employee benefits, your turnover rate will be much lower. This means you can take your business where it needs to go faster! 

Going cheap on wages will cost more in the long run if you constantly have to rehire for the same position.

Office Space, Furniture, and Utilities

The work-from-home business structure has grown exponentially due to the pandemic. However, many businesses have returned to the office in favor of the community-building environment provided. Whether you plan on having your business operate from an office space from day one, or you start from your couch, it’s still important to have a plan in place. Find an inspiring coworking location to help foster excitement and momentum as your business grows! 

Invest Energy and Money in the Right Places

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There’s nothing worse than realizing you have spent money poorly, making you start back at square one. Worse yet, you might find there are no financial resources left! You may find yourself stuck after a year and in need of funds for survival. Don’t let this hurdle cause your business to become a statistic among other companies that don’t make it past 3 years, or even 12 months of existence. 

Running out of money is a big reason why businesses fail. If a shortage in funds is caught early enough, or anticipated before it becomes a problem, you can keep your startup momentum going. Small business loans can help your company pay for large ticket items that have a set cost amount, such as fixed assets like an office building or new equipment. If your company often experiences slow seasons, it may be smart to apply for a business line of credit. This borrow-on-demand loan can help supplement your payroll or fund marketing campaigns to boost your brand exposure.

Be Realistic – Use a Budget

While being ambitious is something to be applauded, your goals still have to be attainable. 50% of small businesses did not create realistic budgets in 2020. With some asserting that budgets are pointless, and others insisting they’re non-negotiable, it’s hard to choose who to listen to when it comes to money tips for startups. 

However, startups with a good budget and detailed business plan have a leg up compared to peers without these tools. Having a budget and business plan helps keep everyone on the same page. They set benchmarks to measure success against, and provide an early warning system. This makes it easier to pivot if growth starts to stall. 

Grow Wisely

money tips for startups
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Growth for its own sake can be dangerous, says Harvard Business School professor Tom Eisenmann. It’s great when a startup sees explosive growth and notoriety in its space; however, the advice to grow at all costs can quickly exhaust strapped resources, and turn a startup into a one-hit-wonder. 

Balance your focus between growth and stability by recognizing the limits at which your startup can operate. If you want to start a massive outbound marketing campaign, make sure your current team is ready to handle the influx of customers. Otherwise, your team will be overworked, and customers will be frustrated by the resulting lack of service. Conversely, if you hire extra talent, but do not see the growth anticipated, you could be wasting money better spent elsewhere. 

Awareness of these potential problems is the first step to move through the growing pains of a startup. As a new business owner, adopting some of these money tips for startups can help you avoid listening to bad advice. It can also narrow your focus, letting you anticipate common pitfalls that new businesses often run into within the first few years. By handling money wisely from the very beginning, you can help set a company up for years or even decades of success.

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