Financial Challenges & Fixes for Start-ups

by Carl Smith Software Developer

Glancing at the Funding Scenario

India moved up the ladder in the Ease of doing business approach recently, climbing up by 23 points in the global index, It’s 2019 ranking for ease of doing business stands at 77th place globally. What has changed in the past few years is not just the ranking in the index but the whole startup ecosystem in the country, specially the financial landscape.

With hundreds of start-ups coming into existence each year the country has surely consolidated and reassured returns for entrepreneurs who are striving hard to provide more and more jobs for the aspiring youth of the country with the progression of their company.

Apart from the regulatory hurdles what sticks as a major roadblock in the economy for start-ups is the lack of proper financing for the new businesses. According to research reports, the seed-stage funding of Indian start-ups declined from USD 191 million in 2017 to USD 151 million in 2018.

Now with the dump in the funding and exponential growth in the number of emerging start-ups has let to fund scarcity in general. On one hand the funding has dragged down, on the other hand the number of start-ups is ever-increasing this has created a situation of intense competition among the start-ups for the seed stage funding. This drives out the less competitive in the game and it has also made survival of the fittest as the norm.

Overcoming Financial Challenges

Now in this cutthroat competitive environment what one can do is maintain prudence in terms of expenditure and revenue management. Maintaining fiscal discipline in the contemporary is extremely vital for the sustainability of the business in the market. Here are a few points that you can work around for improving your financial stand.

Budgeting and Forecasting

The first thing that you should do while planning for your business operations is creating a detailed budget for your operations by forecasting the estimated cost that will be incurred and the revenue that will be generated in the future.

Maintaining a little flexibility in your budgeting process is also advisable given the dynamic nature of the business. Aligning the budgeting and forecasting with your short & long term goals is also equally important for the business as it provides more clarity on prioritization.

Working Capital

This is one of the mainstream problems that new entrepreneurs come across in the initial phase of their operations. The situation arises due to a lack of proper planning for the day to day operations of the business. Working capital is the most essential element for any business, it’s advisable to maintain at least 6 months of working capital to avoid any kind of monetary crunch for your daily functioning.

Profit Margin

Capitalism is the ultimate quest for the maximization of profits. What you need for growing your business without outside monetary aid is good profit margins on the products and services offered, that are high enough to keep you afloat in the near future.

Reducing expenditure to minimum and keeping the fixed costs to minimal is one way of increasing profits. The other way is optimum pricing of your products, the price point should be high enough to gain your decent profit margins.

Cash Flow Management

Cash flow management as the name suggests tracks the flow of cash into your business on account of income and the outflow from your enterprise on the account of expenses. Staying on top of the cash flow management not only gives you obtain insight into your daily expenses and gains but also helps you in budgeting for the future.

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