While nothing is more rewarding than owning a startup that ultimately leads to financial success, it is critical to understand that growing a startup is not without its share of issues. In fact, according to a report by Startup Genome, research shows that almost 11 out of 12 startups fail. While the Bureau of Labor has also found that two out of ten new businesses fail in the first year they are in operation.
That is why, as a startup, if you want to set up your business for success, you must understand some of the more common financial pitfalls associated with startups and how to avoid them.
Mistake 1: Not Understanding the Costs Associated with Startups
It is not uncommon for new entrepreneurs to underestimate their monthly business expenses. However, when startup owners are not prepared for these costs, it can lead to significant profit loss, layoffs, and target growth adjustments.
The Fix: One thing that startups should do is make a list of expenses associated with starting their business. In it, they should include items such as:
- Research expenses
- Borrowing expenses
- Their business plan costs
- Technology costs
- Equipment costs
- Supply expenditures
- Permit and license fees
- Insurance expenses
- Advertising costs
These startups should also identify the ongoing expenses that can help them stay fully operational and running. Understanding these costs and fees can help a startup know how much funding they need to handle these expenses and continue to grow.
Mistake 2: Not Budgeting Appropriately
Although most businesses know that the key to success is to earn more than they spend, applying this rule is not always as straightforward as it should be. When startups are not good at managing their finances, it can cause many issues down the road and ultimately cause them to fail.
The Fix: Startups should consider working with financial professionals who can help them set up their finances appropriately, asses how they can build and grow their finances over the long haul, and set up a budget that works for them.
Mistake 3: Trying To Handle the Accounting Alone
Accounting is essential in maintaining the financial health of a startup. Not only does it involve managing and analyzing the finances of a business, but it also helps managers and owners keep track of critical business issues, such as where their cash is flowing.
Unfortunately, to save on costs, many startups decide that they can handle their own accounting instead of hiring accounting professionals to keep track of their finances. However, what often tends to happen in these situations, is these startup owners discover that managing their accounting is more labor-intensive than they expected, and as a result, important data has fallen through the cracks.
The Fix: Working with experienced accounting professionals can help ensure that your accounting is not only up-to-date but also set up in a way that can provide your startup with critical insight when it comes time to consider significant business decisions.
Find Out How To Manage Your Startup By Contacting Ardent Guardian Today
At Ardent Guardian, we are here to provide your startup with all the solutions your growing company needs. What do we mean by that? Our team can not only handle all of your financial planning, but we can also help you handle your tax issues, accounting problems, and even your legal legwork. In fact, because we are a Certified Financial Planner, attorney, and CPA, we can help your startup get ahead no matter what issues arise.
If you are looking for further information regarding the common mistakes that startups make and how to fix them, contact Ardent Guardian today or call us at 703-592-6774 to schedule a consultation with our team.