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Ecosystems: Finance & Funding

  1. Accounting Sysystem
  2. Record Keeping
  3. Typical Start-up Costs
  4. Funding Options
  5. Plan B
  6. Your Financial Goals

What finances do I need to think about?

With a new startup, keeping from declaring bankruptcy or failure ultimately, relies on having cash flow. Some things to consider:

  1. A simple accounting system.

    Make a system that is easy to understand and user friendly. Something that can be expanded or easily converted when things get more complex later as your business grows. Keep it simple at first, you will be thankful later.

  2. Keeping records - track your cash flow.

    Keeping track of cash flow allows you to analyze your financial status at the end of each business cycle or quarter (or even daily at first). Achieving a balanced cash flow is the idea and should be your goal in the beginning stages of your company. You should always be aware of where your cash is going and what it is being spent on to find ways to budget or cut when needed or spend additional funds on more important areas that provided a better return on your funds.

    When getting started, think about what your company really needs as opposed to what you want. For instance, you may no need to rent an office space at first, or fancy printing or office expenses when you can find a co-working solution.

  3. Typical startup costs

    Costs will vary based on your business type and industry. In general, you will want to budget for the following:

    1. Equipment
    2. Incorporation Fees as discussed in Mapping Your Business
    3. Office Space
    4. Inventory
    5. Marketing expenses (newspaper, TV, Radio, social media)
    6. Website
    7. Office supplies/ furniture
    8. Utilities
    9. Payroll – even if it is just you, you still need to pay yourself
    10. Consultants or contractors you will need (social media, web design, etc.)
    11. Insurance
    12. Taxes – be smart, meet with an accountant
    13. Shipping – if you are shipping product
    14. Travel – you may need to travel to introduce your product or service to new markets.
  4. Funding Options (See Also in Mapping Your Business link)

    While most new businesses actually do not pursue start up investments and rather rely on personal savings, credit, family and friends; some businesses do nee to pursue capital from other sources. Some things to consider if you go down this road:

    1. How much will you need to get started?

      You need to consider EVERYTHING – especially paying yourself! Make sure you are conservative here especially for the first few years of your business which can be the rockiest.

    2. Sources of funds

      Again, most startups rely on personal loans, business loans, loans from friends and/or family. These types of capital require no strings when it comes to running and growing your business -assuming you pay uncle Charlie back his investment otherwise, Thanksgiving is going to be a doozie.

    Beyond that, you may want to seek out Angel Investors. These individuals or companies provide funding for early-stage startups in exchange for part ownership in your company. They may also offer mentoring for new business owners or can even expect some control over business decisions. In general, angel investors participate in less than 3% of new companies.

    Less than 1% of startups find capital from venture capitalists. These funds generally have many individuals as part of the investment and invest in many companies in exchange for equity in the company. These funds are much harder to obtain and generally require some traction from the business to prove success.

    Your financials are a huge decision that should not be entered into lightly. You, of course, will try to minimize costs, but don’t see yourself short. Your GC Entrepreneurship coach can help guide you through this process so you can make the smartest financial funding decisions possible. Learn more here.

  5. Plan B.

    Running into financial issues is inevitable for almost every start up and small business. Having some money or access to cash for potential issues is a smart thing to do… if you can.

  6. Your Financial Goals

    You should build a financial timeline for your business even before day 1. You will want to consider the following:

    1. What should my profit margin be?
    2. When should I expect to break even?
    3. When will I know I can afford to hire employees?
    4. What other expansion opportunities will you be looking for?

    **These questions are basic, but will help you find a direction for your business growth. It will also provide your business a benchmark in which you can evaluate your progress. For assistance with this process and to take a deeper dive into each category above, contact the GC Entrepreneurship Course