Skip to main content

5 Tips to Avoid Cash Crunch and Burn

For a successful venture, you need to have enthusiastic leadership. In the absence of such leadership, the company can go into losses. An enthusiastic leadership will attract employees, investors and customers which will eventually increase the company’s turnover and profit as well. This can also become a liability when you deal with the financials of the company. Running out of cash kills 8 out of every 10 businesses within 18 months of the opening. Here are the lessons to stay away from the cash casualty that your business faces:
1.       Estimate the amount of time it will take to be profitable-then double it
This is a key area for any business. Being an optimist in this situation can be harmful for a budding entrepreneur. It can kill a business as soon as it is started. You need to anticipate that at times you need to finance out of your pockets and you must not be conservative and must have a progressive approach.
2.       Hiring must lag behind the need
You must not hire more people than you actually need. This is a cause of concern in the long run. It can lead to significant layoffs. Startups must try to stretch the capabilities of the employees. Money should not be wasted in extra hires. When you feel that you are growing, that is the time to hire more people, not before that.
3.       Mind-meld with your CFO
Most people prefer fancy and shiny objects but a gifted financial captain can help you to steer to a clear path. He can administer a dose of reality. The key here is a good relationship between the founder and financial officer. Being with the CFO and discussing stuff with him can help make sure there is right alignment of risk and rewards.
4.       Build a war chest
You should have an emergency fund to run your home for at least half a year without any income. The startups must go with the strategy as well. It can involve cash, venture capital or lines of credit. This should ensure that the company can run while it faces a situation of zero cash inflows.
5.       Don’t be penny-wise, pound foolish

Bootstrapped businesses are great at growing lean. Yet the flipside is full with worries about being cost effective rather than spending cash on things that will restrict growth. The risk of overplaying your buildup could be worth it. You need to be smart for it.

This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for GST Software, GST Return Filing, GST Registration, Section 8 Company Registration, Nidhi Company Registration, IEC Registration, Fssai License, File ITR Online.

Comments

Post a Comment

Popular posts from this blog

How can digital marketing help your startup to grow faster?

No one can deny the fact that startups need recognition. Startups, being new to the market, need to tell people that they exist. Market primarily consists of potential customers, investors as well as partners. And these are vital for any business. Without marketing, you and your startup is nothing. No one knows you, so they won’t even bother to spare you a glance. Your idea may be unique and outstanding, but without marketing, that idea is completely useless. Being an entrepreneur, you need to know how to sell your products and services. To sell, people need to know about your existence. You need to attract them. To attract customers, you need marketing. Now, there are two primary forms of marketing. First is traditional marketing and the second being, digital marketing. How are you supposed to choose the best way? How are they going to help? The same is discussed below. Traditional marketing is nothing but the old ways of promoting a company. It can be done via posters and banners. ...
7 comments
Read more

The 3 Relationships That Matter When Your Company Is Being Acquired

Getting acquired is one of the major moments of your life. It is a mix bag of feeling because your startup is like a baby that you nurtured from the start and now after selling it away, things will never be the same and you might not have the same freedom to run that business as you used to. The whole process itself is very tedious and involves a lot of aspects. Your legal advisor and countless manuals may furnish you with all the details however you might not have anyone who would guide you how to handle the people aspect related to you’re the whole process of acquisition. So let me help you now. There are a lot of people involved and you need to have cordial relation with almost all of them and have no grudge against any. During this delicate time, it is essential for you to maintain your calm and no matter how stressed you are from the inside, you must stay calm on the outside. And in this critical time, it is imperative for you to have soft skills and here are three important rela...
2 comments
Read more

5 Tips to Help Your Startup Operate Smoothly from Day 1

To pass the different stages of building a startup, you need not climb the treacherous mountains but pass through the valleys paved by others. Starting your own venture can be a quite daunting task. The can be like hurtling down a potholed road with the ups and downs and the unpredictability that takes extra efforts to overcome. It is good to heed the advice of the experienced people. It is always advised to take away from experiences of a person who has gone through the potholed road. To be an entrepreneur in competitive times like these can be a daunting and a demanding task. You need to give in all you have with zero complaints. The following are the best ways to get through the startup transition on day 1: 1. Keep your heart full, your mind clear and your body active You need to keep yourself well through the transition process. It’s good to take some time out for yourself. Do some physical activity, read in your free time and learn every time. You need to understand that...
1 comment
Read more