by Tina Hay, founder and CEO of Napkin Finance
One of the most important factors in becoming a successful entrepreneur is managing finances. Whether early or later-stage, the growth of every company most often depends on how much capital is available to fund its growth.
Even if your product or service will be solving an important problem, it often takes time and money to build and test a working prototype. Not to mention all of the resources that will have to be invested in marketing and growing a community around it. To prepare for a successful startup, it is best to plan ahead.
Here’s a checklist that will help you get started:
Estimate Start-Up Costs.
Depending on the type of business, this includes everything from legal, machinery, equipment, inventory, overhead, and domain name, to web services.
Learn About Licenses.
Find out if you need one, and if so, what kind? Penalties for failing to register a business can be very costly.
Set Up Separate Banking Accounts.
It is important to set up separate checking and credit accounts to keep expenses organized. This will also prepare your business for filing taxes.
Determine Operating Expenses.
Estimate your monthly “burn rate.” How much are you spending each month on employees, bills, inventory, and other expenses? This will also help identify ways you can save money on expenditures by buying in bulk, changing suppliers, or altering your product to be more cost efficient. Keep track of who owes you money if you do business on credit, and make sure you are paid in a timely manner to keep your cash cycle flowing smoothly.
Make Sure You’re Insured.
Find out what kind of insurance your business needs in the short and long-term. This will depend on the type of business, if you have employees, and what your product or service.
Keep Detailed Records.
Keep track of not only income and expenses, but also correspondence, invoices, and all other records that you may need to access down the line.
Define Your Business Model.
There are numerous types and will determine how you grow and run your business. Some of the most common include:
- B2B: Business to Business – Selling a product or service to other businesses.
- B2C: Business to Consumer – Selling a product or service directly to the daily consumer.
- SaaS: Software as a Service – Subscription-based and centrally hosted.
- Peer-to-Peer – Enabling people to buy or rent directly from each other.
- E-commerce – Online shopping.
- Non-Profit – Organizations working for social good.
Remember Your Taxes.
Consult with your accountant, and if you follow this checklist, you should be prepared well in advance!
If you’re headed down the road of disrupting an industry, check out the Napkin Finance advice for starting a startup.
Tina Hay, Founder and CEO of Napkin Finance comes from a diverse background encompassing film, technology and finance. Her personal struggles understanding complex financial topics led her to found Napkin Finance, a guide to everything you need to know about money in 30 seconds or less. The mission of the company is to empower readers to make smart money decisions and build a lifetime of financial well-being.