Nibletz Staff
Getting finance for your startup can be a daunting task, especially if you know that you’ve got a significant need for capital. But many startups, even those financed by vast amounts of venture capital, can run into problems if their burn rate is too high and they’re not making any significant money.
If you want a startup that lasts, you need to get to grips with your finances. Here are some words of wisdom to avoid debt from crushing your startup before it’s even gotten off the ground.
Source Minimally
Many small business owners operate under the assumption that the need the best of everything when they start up. For instance, they need the best office furniture and the best computers to make their business run how they want it to. But it turns out that this strategy usually ends in disaster. A lot of the equipment you though you’d need just winds up going unused, sitting in the back room, not doing much at all. A much better strategy – and one that will reduce your burn rate – is to only buy office equipment as and when you need it.
Get Flexible Finance
Another way that startups get crushed by debt is when their credit lines are non-negotiable. Often, startups will be making money, but they’ll be “cash poor” meaning that they aren’t getting money in fast enough to cover their loans. In some cases, even though the business is viable, it can end up going under, simply because it isn’t able to make payments in the short term because of its loan repayment schedule.
Suppose, for instance, your company had been promised a million dollars worth of business by another firm, but that money would only arrive in dribs and drabs over the following year. Now imagine that same startup has very little cash on hand to remain in operation. Rigid lenders could send that company out of business if they demand payment today and prevent the company paying its staff or suppliers.
This is why Colbeck Capital, an investment firm, recommends that startups choose loans with in-built flexibility. Flexible loans provide relief when it is most needed, allowing startups to restore their cash flow and continue in business.
Look For Bartering Opportunities
When cash is tight, it really matters. So it’s a good idea, where possible, to look for opportunities to barter and skip out cash entirely. For instance, perhaps you could trade internet access with a neighboring firm to use their car parking space or storage facilities.
Buy Used Equipment
According to estimates from Epic Launch, second-hand office equipment can be up to 75 percent cheaper than buying it brand new. Sometimes these items of furniture will be a bit beaten up, but that doesn’t matter, so long as only employees of your firm see them.
If you’re worried about what clients think, don’t go to the expense of making your office look super swanky. Instead, hire out meeting rooms in a separate office at a much lower cost.
