COMMON F INANCIAL MISTAKES YOU SHOULD AVOID WITH YOUR STARTUP

BY GEOFFREY BYRUCH

WHENEVER SOMEONE ASKS ME FOR A P IECE OF BUSINESS ADVICE , I GENERALLY SAY THE SAME THING: ‘NEVER RUN

OUT OF MONEY. ’

AS AN ENTREPRENEUR, RUNNING A BUSINESS PERSIST ON THE IDEA THAT YOU HAVE THE NECESSARY FUNDS TO BE

OPERATIONAL .

JUST THINK ABOUT THE WORST-CASE SCENARIO. WHAT WOULD HAPPEN IF YOU FAIL TO PAY YOUR EMPLOYEES ,

YOUR SUPPLIERS , OR YOUR BANK?

AS OUTRAGEOUS AS THIS MAY SOUND, THIS S ITUATION TENDS TO HAPPEN WITH VARIOUS STARTUPS.

FOR MANY CASES , THE REASON COMES DOWN TO THE CARELESSNESS WITH COMPANY F INANCES.

TO HELP PREVENT YOU FROM FALL ING INTO THESE TRAPS , I HAVE PROVIDED FOUR BAD HABITS YOU SHOULD AVOID.

1 . SPENDING MONEY ON MISCELLANEOUS ITEMS

WHETHER IT IS EGO OR SUCCESS , THE LACK OF INTELLECTUAL HUMIL ITY FOR R IS ING STARTUPS HAVE FORCED GREAT

COMPANIES TO GO BEYOND THEIR OWN F INANCIAL L IMITS .

TO PREVENT THIS , THE S IMPLE IDEA YOU NEED TO EMBODY IS BUILDING A F INANCIAL BUDGET THAT CAN HELP YOU

SURVIVE AND EXPAND INTO A STRONG AND V IABLE COMPANY.

BECAUSE OF THIS , MAKE SURE YOU CUT DOWN ON SPENDING .

2 . MISUNDERSTAND YOUR CASH RESERVES

ONE OF THE B IGGEST MISCONCEPTIONS MANY STARTUPS HAVE IS THAT THEY ARE OVERLY OPTIMISTIC ABOUT THEIR

F INANCES BECAUSE THEY HAVE THIS EXTRA CASH RESERVES .

JUST BECAUSE YOU HAVE AN EXTRA POOL OF CASH DOES NOT MEAN YOU ARE NECESSARILY IN A GOOD PLACE.

TO PUT YOU IN A BETTER PLACE , MAKE SURE YOU HAVE THAT F IGURE OF HOW MUCH CASH YOU HAVE AT HAND.

ONCE THAT IS NOTED, BEGIN ANALYZING AND ADDING UP ALL OTHER FACTORS THAT CAN IMPACT OR AFFECT THIS NUMBER IN E ITHER A POSIT IVE OR NEGATIVE MANNER.

3 . NOT REVIEWING THE F INANCIAL NUMBERS

IT IS ABSOLUTELY V ITAL THAT YOU HAVE A HOLIST IC UNDERSTANDING OF THE EXPENSES YOUR COMPANY IS

CURRENTLY ENDURING .

TAKE INTO ALLOCATION OFF ICE SPACE RENT, EMPLOYEE SALARIES , OFF ICE EQUIPMENT, SUPPLIERS , MARKETING , ETC .

ALL OF THESE FACTORS WILL HELP YOU COME UP WITH A NECESSARY F IGURE TO COMPARE YOUR TOTAL EXPENSES AGAINST

YOUR TOTAL REVENUE TO HELP YOU GET THE OVERALL NET PROFIT YOUR COMPANY IS ACTUALLY MAKING .

4 . FA IL ING TO FORECAST CASH REQUIREMENTS

ONE OF THE B IGGEST MISTAKES YOU CAN DO IS OVERLOOK YOUR CASH REQUIREMENTS.

TOO MANY COMPANIES , ESPECIALLY STARTUPS, HAVE FAILED TO MAINTAIN AN ACCURATE AND ORGANIZED UP -TO -DATE

F IGURE OF THEIR OVERALL CASH FLOW FOR THEIR COMPANY.

TO REMEDY THIS PROBLEM, BUILD AND UTIL IZE A CASH FORECASTING SYSTEM THAT CAN TRANSFER FUNDS IN -AND-

OUT OF YOUR ACCOUNT WITH EASE .

T O L E A R N M O R E A B O U T G E O F F R E Y P L E A S E V I S I T T H E F O L L O W I N G S I T E S

GEOFFREY BYRUCH ABOUT.ME

GEOFFREY BYRUCH CAREER

GEOFFREY BYRUCH ENTREPRENEURSHIP

GEOFFREY BYRUCH CRUNCHBASE