Financial startup basics are the essentials that startups need to know to ensure financial health and secure the funds required for growth. Nine out of ten startup failures are caused by the absence of these fundamentals. The reason is straightforward – cash flow. A startup that does not know how to track and forecast cash flow will be unable manage its budget, or invest in growth.
Investors need to see your startup’s financial projections and income statements. These models need to be calculated carefully to accurately reflect your business’s economics. This includes easy-to-overlook costs like shipping, taxes and insurance, processing fees for payments and utility costs.
If traditional lenders aren’t available family and friends may lend money to startups in the beginning. In this instance it’s crucial to set the financial startup loan terms in writing to ensure that there are no disagreements regarding repayment obligations or expectations for future performance.
Startups can also seek out venture capital from an investor from the private sector or crowdfunding platforms such as Kickstarter. However, these types of financing typically require the creation of a business plan in writing with a complete financial model. A model can help you to gain an understanding of the financials of your business, allowing you to make informed choices about how much capital you will require and the strategic goals you’d like to achieve by the time next year rolls around.