Here are four financial mistakes new startups and small businesses should avoid in 2021:
When it comes to startups, there are quite a few opinions and perspectives on spending money to make money. Some founders argue to be frugal while others push to spend and grow as they hope to get even more investor cash. Regardless of what you believe, the second most common reason startups fail is because they run out of cash. Cash is the lifeblood of the small business or startup.
So, you need to walk a fine line of preserving cash and being as creative as possible to move the startup forward. Here are four insights on how you can preserve and maximize the cash needed to get a startup or small business off the ground.Remember when you had no money, either early in your life, in college or that first job? You got by with exactly what you needed.
During the first year of your business, there are a lot of unknown variables and unexpected learning opportunities that'll come your way. The reality is that you're going to hit roadblocks. You're going to have failures and some of these may come with a big price tag on them. If you've rushed out and purchased a car, home or another large personal expense and your business has something unexpected come up that means you won't be able to pay yourself next month; you can't be strapped down with an exorbitant amount of personal expenses. Be as lean as possible in both your business and personal life while growing your new company.
Call it saving for a rainy day as there will be times when something unforeseen happens and covering the cost using your credit card is a shortsighted solution that only tends to create more problems down the line. Most financial planners advise entrepreneurs to keep at least three months' worth of expenses in an emergency or contingency fund for both their business and their personal expenses. Investors have a term they use when funding a startup, your runway.
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