According to Statistic Brain, 46% of businesses that fail do so because of the following reasons:
• Emotional pricing
• Living too high for the business
• Non payment of taxes
• No knowledge of pricing
• No experience of financing
• No experience of record-keeping.
All these factors have a huge bearing on a business’ cashflow. As a start-up, you must guard your cashflow jealously because it will determine if the business will sink or float. Here are some tips to help you manage your cashflow even better:
Limit Your Expenses
All things seem important when starting a business. It’s just like shopping for your first baby. You assume you will need everything that is sold at the baby store – including the battery-operated mixing spoon (which you may never use). The startup stage is when you need to count your pennies to ensure you have enough cash to keep you afloat. Limit your expenses and only buy what is needful. Do not splash out, anticipating the customers you will get along the way. You may also have to defer your salary for a few months until your business starts to generate a healthy profit.
Find a Bridge
There is nothing wrong in keeping your day job or finding a part time role when you start your business. Having a separate source of income in the initial start-up stage will take pressure off your business and eliminate the desperation. When business owners become desperate, they tend to cut corners, charge inappropriately and probably lose customers too. Avoid the feeling of helplessness in your business by ensuring you have funds available to take care of the first few months. When you start to generate a steady income for your business, you can quit the job and focus on your business on a full-time basis.
You need to be realistic about your business goals. We all start with a high dose of hope that our businesses will do well. Many businesses do succeed, yours can too as long as you put hard work and effort into making it a success. When you enter the market, do remember that the other brands are not going to lie down and play dead. Your product might become the best seller in a few months – but plan your cash flow to take account of when the money has not started rolling in.
Keep Good Records
Be conversant of what goes in and out of your business bank account if you have one. If you do not have one, do get a bank account for business use. It is much easier to manage your business transactions if all your income and expenses are from a single-use account. Do not mix your home expenses with your business ones – it can be chaotic when you need to reconcile your accounts at year-end.
Manage your invoices effectively. Clearly specify your payment terms to your clients. If you sell products that are paid for before checkout, that is great. But if you provide services or supply on credit, you need to keep an eye on your invoices and outstanding payments. Follow up on late payers and ensure you step in early enough to recover your payments.
Before you subscribe to a monthly program, service and special offers be aware of your cash flow. Subscription fees are deducted on a monthly basis, whilst some are quarterly. Keep records of the payment dates and try to avoid the deductions coinciding with salaries or big expenses days.
No one knows your business as much as you do, so you know where adjustments are required to ensure it stays sustainable. Staying on top of your cash flow and business expenses will help you create a business that is viable and successfully for years to come.