So you’ve created a new product and want to launch a company. That’s great, but do you know that getting good traction for a product launch is tantamount to trying to drive in snow?
Most entrepreneurs learn a very painful lesson: Lack of money and financial planning are the biggest obstacles to financial traction.
For them, often the most difficult part of launching a business is preparing financial projections. It may not be the most enjoyable task, but budgeting is imperative for maximizing performance.
As you create a budget, make allowances for your new venture. You have to make sure you know how much money you need and when you’ll generate revenue.
It’s imperative to understand the risks from business expenses – fixed and unplanned costs.
Here’s what you need to do:
Write a business plan, or at least a budget
There are many valid reasons to write a business plan. They’re not necessarily to attract capital.
They’re also necessary as a road map. Avoid writing a mediocre document. To ensure success, write a great business plan.
“Eight out of 10 companies fail in the first two years due to insufficient cash,” warns esteemed financial consultant Roni Fischer (www.rlfassociates.com).
Consider your short-term and long-term risks in budget planning. The risks are many from reliance on employees to possible natural disasters.
Budget more than you anticipate for line-item costs. Why? There are always surprises.
Whether you’re a service or product business, every client has different needs and expectations that can add to your uncertainties.
Accurately forecast sales cycles
Be prepared – in case your sales pipeline dries up or if your sales slow down. You’ll have to account for your expenses in all scenarios.
Some business advisors suggest ramping up your marketing during slow times. However, in my experience, marketing must be a continuous, ongoing effort. And that means identifying your right target audience and constantly thinking about how attract new customers.
Anticipate big expenses carefully
Commonly, businesses always incur major expenses when they least expect it. Your insurance rates skyrocket, or your computer system dies or your facility is hit by a fire.
But some major expenses can be anticipated, such as a new software system or building renovation.
Up-to-date budget projections are vital.
“Eight out of 10 companies fail in the first two years due to insufficient cash.”
Factor in your time costs
Time is money. If you underestimate your time costs, you’ll encounter unnecessary hardship. In all projects you run the risk of mission creep.
One overlooked time-cost is customer service. Plan to give your clients adequate time to listen and address their concerns. Their feedback is important.
Budget your time so you’re rarely working against deadlines, which are a huge time-waster. Give yourself some wiggle room.
If you expect to complete a client project on Wednesday, promise a Thursday delivery date. If you can deliver the product on Wednesday – that’s terrific. But if you encounter last-minute problems and need an extra day, you’ll still be a hero.
Monitor your budget regularly
As you grow, your cash flow needs will change. So make adjustments accordingly. You always have to be mindful to control your finances.
Create a safety net
Use additional profit to start a savings plan. You’ll have money to take care of unexpected business and family expenses or to take vacations.
Remember, you cannot afford not to take vacations. Entrepreneurs have a stressful career. You’ll need R&R to recharge mentally.
From the Coach’s Corner, here are related tips:
Startup Financial Planning: How to Get a Pragmatic Forecast — Unless you have a lot of startup experience, it can be a little tricky to make down-to-earth financial projections for your new company. Pragmatic assumptions are important in such a forecast.
Checklist to Increase Your Startup’s Cash Flow — It’s true that cash flow is the salient dynamic that leads to the failure or success of a business. Whether your new company’s performance is stagnant or you’re growing quickly, cash flow is paramount. There are at least 11 ways you can increase cash flow for your business to function properly.
Why Startup Companies Fail – How to Win — It’s vital to conduct a thorough needs-assessment of strengths, weaknesses, opportunities and threats – followed by development and implementation of a strategic action plan. Here’s more.
Planning – Tips for Avoiding Growing Pains in Your Startup — After reading my article, How to Start a New Business Before You Quit Your Job, a reader asks: Q: Terry, Going into management and learning leadership skills (self-develop and mentored) are great tools no doubt. These can be vital once your new biz is off the ground.
Tips for Moms Who Want to be Entrepreneurs from Home — So, you have a job and would like to fire your boss to work at home. Let me caution you. Starting a business at home might be the biggest challenge of your life. Starting a home-based business has risks. It can sap your energy and time.
“It ain’t how much you make. It’s how much you bring home.”