In the world of business, it’s rarely plain sailing. But when you’re just starting up, things are even more challenging. You might have a fantastic idea and a bunch of willing customers who will gladly part with their money, but if your finances are out of whack, you can quickly find yourself in trouble.
Many people new to the world of business fail to understand that financial difficulties are an inevitable part of starting up. In the beginning, there’s almost never enough money to do everything you want to do: expand, market to new audiences, take on new staff – and you have to compromise.
Here are some of the financial difficulties your startup will face and how to overcome them.
One of the rookie mistakes often made by founders is failing to include unexpected costs in their calculation for how much money they will need. Unexpected costs aren’t just common in business, they’re guaranteed. Things will almost certainly go wrong and some point, and you’ll be forced to hand over money to somebody.
Many startups get into a situation in which they need money quickly, but they don’t have any money in their accounts. Fortunately, there are still options. Rather than going back to investors and admitting that you made a mistake in your original calculations for how much funding you need, try approaching a factoring service. These services take a look at your accounts receivable – the amount of money you’re currently owed by clients – and offer you money to buy those invoices from you. Although you’ll get less money from the factoring company than you would from the clients, you no longer have to follow up with non-paying customers, plus you get the added benefit of avoiding going further into debt.
Too Little Money To Take Advantage Of Opportunities
Another common problem for startups is not being able to grow quickly enough. Often, it is advantageous to dominate a market as fast as possible before a competitor moves in and steals market share, but poor finances can get in the way. Startups rarely have surplus capital on hand to buy their way out of the problem, and so they need an innovative solution.
The good news is that it is no longer necessary to buy everything you need up front. Many startups are choosing to rent to own equipment instead. Under this setup, entrepreneurs come to an agreement with a third party company to pay for the services of the equipment, month after month, rather than immediately owning the equipment outright. This means that if you do change your mind about whether you want a particular truck or machine, you can always sell it back to the company that leased it. If you do want to keep it, however, it’s yours, once all the payments are complete.
Finally, bad pricing can be a problem for many startups. Don’t go in too low – you’ll find that you’ll struggle to break even and your competitors will be more profitable.