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COMMON F INANCIAL MISTAKES YOU SHOULD AVOID WITH YOUR STARTUP
BY GEOFFREY BYRUCH
WHENEVER SOMEONE ASKS ME FOR A P IECE OF BUSINESS ADVICE , I GENERALLY SAY THE SAME THING: ‘NEVER RUN
OUT OF MONEY. ’
AS AN ENTREPRENEUR, RUNNING A BUSINESS PERSIST ON THE IDEA THAT YOU HAVE THE NECESSARY FUNDS TO BE
OPERATIONAL .
JUST THINK ABOUT THE WORST-CASE SCENARIO. WHAT WOULD HAPPEN IF YOU FAIL TO PAY YOUR EMPLOYEES ,
YOUR SUPPLIERS , OR YOUR BANK?
AS OUTRAGEOUS AS THIS MAY SOUND, THIS S ITUATION TENDS TO HAPPEN WITH VARIOUS STARTUPS.
FOR MANY CASES , THE REASON COMES DOWN TO THE CARELESSNESS WITH COMPANY F INANCES.
TO HELP PREVENT YOU FROM FALL ING INTO THESE TRAPS , I HAVE PROVIDED FOUR BAD HABITS YOU SHOULD AVOID.
1 . SPENDING MONEY ON MISCELLANEOUS ITEMS
WHETHER IT IS EGO OR SUCCESS , THE LACK OF INTELLECTUAL HUMIL ITY FOR R IS ING STARTUPS HAVE FORCED GREAT
COMPANIES TO GO BEYOND THEIR OWN F INANCIAL L IMITS .
TO PREVENT THIS , THE S IMPLE IDEA YOU NEED TO EMBODY IS BUILDING A F INANCIAL BUDGET THAT CAN HELP YOU
SURVIVE AND EXPAND INTO A STRONG AND V IABLE COMPANY.
BECAUSE OF THIS , MAKE SURE YOU CUT DOWN ON SPENDING .
2 . MISUNDERSTAND YOUR CASH RESERVES
ONE OF THE B IGGEST MISCONCEPTIONS MANY STARTUPS HAVE IS THAT THEY ARE OVERLY OPTIMISTIC ABOUT THEIR
F INANCES BECAUSE THEY HAVE THIS EXTRA CASH RESERVES .
JUST BECAUSE YOU HAVE AN EXTRA POOL OF CASH DOES NOT MEAN YOU ARE NECESSARILY IN A GOOD PLACE.
TO PUT YOU IN A BETTER PLACE , MAKE SURE YOU HAVE THAT F IGURE OF HOW MUCH CASH YOU HAVE AT HAND.
ONCE THAT IS NOTED, BEGIN ANALYZING AND ADDING UP ALL OTHER FACTORS THAT CAN IMPACT OR AFFECT THIS NUMBER IN E ITHER A POSIT IVE OR NEGATIVE MANNER.
3 . NOT REVIEWING THE F INANCIAL NUMBERS
IT IS ABSOLUTELY V ITAL THAT YOU HAVE A HOLIST IC UNDERSTANDING OF THE EXPENSES YOUR COMPANY IS
CURRENTLY ENDURING .
TAKE INTO ALLOCATION OFF ICE SPACE RENT, EMPLOYEE SALARIES , OFF ICE EQUIPMENT, SUPPLIERS , MARKETING , ETC .
ALL OF THESE FACTORS WILL HELP YOU COME UP WITH A NECESSARY F IGURE TO COMPARE YOUR TOTAL EXPENSES AGAINST
YOUR TOTAL REVENUE TO HELP YOU GET THE OVERALL NET PROFIT YOUR COMPANY IS ACTUALLY MAKING .
4 . FA IL ING TO FORECAST CASH REQUIREMENTS
ONE OF THE B IGGEST MISTAKES YOU CAN DO IS OVERLOOK YOUR CASH REQUIREMENTS.
TOO MANY COMPANIES , ESPECIALLY STARTUPS, HAVE FAILED TO MAINTAIN AN ACCURATE AND ORGANIZED UP -TO -DATE
F IGURE OF THEIR OVERALL CASH FLOW FOR THEIR COMPANY.
TO REMEDY THIS PROBLEM, BUILD AND UTIL IZE A CASH FORECASTING SYSTEM THAT CAN TRANSFER FUNDS IN -AND-
OUT OF YOUR ACCOUNT WITH EASE .
T O L E A R N M O R E A B O U T G E O F F R E Y P L E A S E V I S I T T H E F O L L O W I N G S I T E S
GEOFFREY BYRUCH ABOUT.ME
GEOFFREY BYRUCH CAREER
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