If you have this great idea for a solution that could revolutionize or impact the world, all you need is an investor to get on board with it. This might be the popular mindset, but it’s not always true. This will help you build a half-baked company that will eventually become a member of the club of failed startups. It is necessary to play it smart by having a strategy like any other area of your business. You need to manage your budget from day one.
Create and follow a budget. Set an estimate of your income and expenditure for a given period. When you lack experience or if it’s your first time running a company, it can get a bit scary. You might not be able to make estimates or projections for your budget. Failure can be learning but, you should be serious about setting a budget and managing your finances.
The importance of budgeting.
Use budgeting tools to track and manage your budget. If you master and use a budgeting tool correctly, your startup can benefit in many ways. It will help you to project profits and help create timelines. It allows you to see the whole picture by comparing initiatives when tracking return on investment and calculating the same. Controlling and managing your spending habits also help you differentiate between your needs and wants.
Planning a financial roadmap will allow you to make crucial choices when it comes to making investment decisions. Plan how much capital you want to raise and practice your pitches when it comes to approaching an investor. While interacting with an investor, it is always a good idea to show them how much you know about budgeting and having an overall understanding of your financial goals. The best part about setting a budget is that it is direct and needs the same process independent of your plans or operating costs. Here are some tips to plan an effective budget for your startup.
The spreadsheet is your best friend.
A spreadsheet with one tab for revenue and another for expenses can be helpful. Starting with them separately is advisable. Start by planning a monthly budget. This will allow you to create an annual budget that can include renewals, subscriptions, and other annual expenses.
In case you make any one-time startup expenses that won’t happen throughout the year, track them but do not add them to the spreadsheet. Recurring transactions can be documented and ensure that you know how each of your expenses drives business. Create an estimate based on projected sales if you are in the pre-revenue stage. Your budget can help you set goals and achieve them.
Segregate sheets according to the department.
It is wise to create separate spreadsheets for each department. Ensure that you focus on your marketing and sales revenue. If you’re mostly business to business, focus on sales budget, and if you are mostly business to customer, focus on marketing.
Have a plan B
Plan a best case and worst case budget. If you want to be ready to strategically manage a surge of income or be able to survive when there is not much revenue coming in, this can help in the long run. Cash runway and burn rate can be determined by effectively planning your budget. After you have secured your first round of funding, these will come to play.
Start from your startup’s inception, as this will make planning, tracking, and analyzing your budget a habit. It will be easier for you to track your budget once your company grows bigger.
Stick to your budget
Setting the budget is just the first step. The challenge is sticking to it. There will be times where you would need to adjust your budget according to unexpected expenses or opportunities to invest. You can also witness a surge of revenue that may require you to evolve your budget as well. Constant revaluation here is key.
There are many apps available in the market to make budgeting and planning a lot easier. Understanding and mastering the spreadsheet is foundational. There are a plethora of software options on the market that can help large corporations track and plan their budget. By the time your startup evolves to that stage, if you follow these tips, you might have a good grasp of managing your budget.
If you have a big idea, try pitching it to CILA Labs. With an excellent tech team and a state-of-the-art marketing team, CILA Labs sometimes invests and funds your idea as well as partners with you. CILA Labs also offers a golden opportunity to impact the world and become a co-founder. For more information, visit Project 10K website