Early Financial Management Tips for Entrepreneurs
Following these simple yet effective tips will help you make a substantial difference in the market
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Seems like it has happened in the days just gone by. As soon as the digital drive started gaining currency in India, we all stood witness to a state of virtual frenzy within the startup ecosystem. Tech-driven startups began mushrooming all across the country and emerged as the "blue pill' for nearly every market challenge. Enchanting customers and investors alike, funds started flowing in bulk towards the startup ecosystem. With it, new-age entrepreneurs set off on unbridled (and, maybe, unviable) discounts in an attempt to acquire and retain as many customers as possible.
India's digital ascent paved the way for a lot of promising startups in India. Startups that have now become an integral part of people's day-to-day lifestyles in the form of cab-hailing apps, mobile wallets, food ordering applications, digital lenders, and so on to name a few. Some were acquired by larger enterprises and became their subsidiary in the market. However, a majority of promising startups that mushroomed back then didn't turn out to be as fortunate. Now, it seems like their entrepreneurs and investors should have taken the "red pill' of reality instead.
Avoiding the Entrepreneurial Blue Pill: How to Manage Finances Following Market Foray?
As they say "money makes the mare go", nothing of substance can be achieved in the market without the power of money. This time-tested proverb cannot be any truer for startups, which can often be seen as challenging market bigwigs with limited resources. Startups have to be financially prudent until they establish their foothold within the market. So, if you're an entrepreneur yourself, here are some financial advice that will help you in doing the same:
Minimize Assumptions: Financially speaking, assumptions are the least desirable element within a business model. This is because assumptions naturally come with bated breaths, wherein the market movement could go in the polar opposite direction of what is initially assumed. So, make your business model as robust as possible by breaking down everything into the smallest component. This includes your operational expenses, investments, returns, and even your target audience. Come up with the proof of a concept by testing the viability of your model on a smaller scale. If your results are in line with your assumptions (for a homogenous market), only then go ahead with your business plan. Otherwise, try and understand your shortcomings and give it another go with a pilot project.
Plan B, Plan C, and Plan Z: Always have more than the adequate financial and strategic buffer for your business. This will ensure that you reserve a place to fall back on if things do not go into your favour. Theorise all possible scenarios for your business and develop a financial plan well in advance for them. This will save you from last-minute hiccups during such events.
Financial Stability: Market opportunities – especially those in which you can clearly visualize turning things in your favour – are often rare, if not completely non-existent. And when such opportunities emerge, they can become as enticing as they get for entrepreneurs. Whenever you have a choice between financial stability and market opportunity, always prefer the former. Only go for those market opportunities where you have adequate data and market insights that you can confidently rely on.
Limit Your Expenses: For startups, staying low as and where possible is the key to longevity. You don't need an office in a plush locale which is full of lavish interior décor alongside a corner office for yourself that captures the perfect view of the city. You just need a place where you can accommodate your team, plug into your laptop, and scale business until you are able to lease, if not buy, the former. Curtail your initial expenses to the very extent that you can and avoid everything that doesn't directly adds value to your business model.
Fundraising: Although a majority of new-age entrepreneurs believe that funding is the cause of market success, it is barely the same. A fund-raising round, simply put, is a mere juncture that will add impetus to your market momentum – if your startup is able to survive till then. Do not jump into the market with the sole aim of fundraising. Rather, focus on viably delivering results as such results are what will get investors onboard. Also, try and avoid investments as much as you can since investments in startups are largely equity-based and in the longer extend a larger dividend to the investor. If possible, go for debt-based investment when needed.
Following these simple yet effective tips will help you make a substantial difference in the market. Above everything else, they will ensure that you do not fall prey to the "blue pill' trap that a majority of startups have yielded to over the yesteryears. The market, despite its sheer dynamism, is not as complicated as one might think. All you need to do is lay a robust foundation, maintain the right approach, and who knows, you could be the next unicorn in the making!