Starting is a business in the current economy is far from easy, and the statistics appear to bear this out. After all, more than 50% of new businesses are destined to fail within their first five years, as they struggle with issues such as sustainability, scalability and intense competition in their marketplace.
Finances and cash-flow are also major issues for small businesses, and this is borne out if you drill down further into the numbers. Ventures that survive their first five years subsequently grow stronger over time, for example, primarily because they have established sustainable revenue streams and the capability to maintain a healthy level of working capital.
3 of the Main Financial Considerations When Starting a Business
With this in mind, businesses that are able to minimise their cost bases from the outset will have a far greater chance of achieving success and commercial longevity. So, here are three of the main financial considerations to bear in mind when starting a new venture: –
Employee Bonus and Recognition
While common logic may suggest high salaries and lucrative bonuses represent the best ways of acquiring top industry talent, this does not reflect the changing nature of the workforce in 2016. After all, the modern generation of employees (and particularly millennials) are increasingly motivated by job security and responsibility, so this may offer you an opportunity to reward staff members while also saving money.
So, by empowering your employees as decisive problem solvers and strategic thinkers, you are affording them a sense of accountability that enables them to grow with the business. This offers employees a level of satisfaction and recognition that financial incentives lack, enabling you to reduce operational costs without impacting on performance.
It can trigger long-term savings too, as it makes employee retention easier over time and this is known to be far cheaper that acquiring new representatives.
Overheads and Operational Costs
On the subject of operational costs, start-up ventures must strive to manage their overheads from the moment that they begin to trade. After all, this has a direct impact on profitability, as soaring costs can undermine even the largest annual turnover.
Aside from your annual wage bill, you must also consider the cost of rent, equipment and utilities. The latter point is particularly important, as business electricity and gas represent huge costs that can now be minimised through the use of smart, automated metres. These are fast becoming mandatory for businesses, as they transmit accurate data to suppliers and make it possible to reduce both energy consumption and costs.
Through the integration of this and similar measures, it is possible to keep your overheads down while also minimising your companies carbon footprint.
Historically, this posed one of the biggest issues to start-ups, who would be forced to commit to a long-term and costly lease that undermined their long-term growth plans. More specifically, firms would either need to invest in a cheaper, smaller space that prevented them from scaling their efforts, or they would spend outside of the means to secure larger premises.
Neither of these scenarios is ideal, but fortunately modern start-ups have a far wider range of diverse options when sourcing business premises. No single concept represents this better than pop-up stores, which are prominent in retail and can be secured cheaply (on the terms of a rolling contract). A few creative entrepreneurs have even based their businesses out of mobile storage units, as this affords them minimal rental costs, no long-term commitments and genuine flexibility.
Make no mistake; this is a key consideration for start-ups, who must choose a location in line with their budget, business model and long-term growth plan. This helps them to strike the balance between reducing costs and scaling their venture in the future.