The Equation You Need To Figure Out If Your Startup Can Stay Afloat

https://www.pexels.com/photo/ideas-whiteboard-person-working-7369/

The devil is in the details when you are trying to budget successfully to keep your startup company afloat, especially in those really turbulent early days. The first 12 months is the benchmark a lot of companies set themselves to see a little sign of progress. While we all would like to make a huge profit without even trying, the fact of the matter is that this is very difficult to attain. But I’m not trying to put a downer on things, just stating the facts. What you can do, in those early days, before the business has even launched, is to meticulously plan ahead, and the finances is one aspect that, believe it or not, you can gain some control over, and it starts here.

To begin with, you need to take stock of your business assets i.e. what you need now, and in the coming years. Discounting money as an asset for the moment, this consists of all the equipment, from the computers, all the way down to the waste paper bins. You make an inventory of everything you need, and this is what we shall call your starting assets. For each individual item, make an educated guess about how much each one costs.

The next step in planning your finances is to add the starting assets to the business expenses. Different from the assets, this is defined as something that you can spend your finances on which is integral to the development of your business. Examples include paying your employees, or if you are already in the swing of business but have hit the predicament of clients not paying, paying the invoice finance fees if you have needed the help of financial advances. So, adding your starting assets together with the business expenses.

The next step is to figure out how much money you will need during the first few months of the business. There are different opinions to what period is considered the “difficult period,” and it could be 6 months or it could be 12 months depending on who you ask. As 12 months is a whole year, it makes sense to factor in this amount of time due to financial and tax years etc. So, you need to estimate the cost of the expenses, the expenses themselves over the 12 month period, and the sales. If you are unsure about what your outcome may be, then by making a sales forecast, this will help you out.

So, by now, you have a list of the first 12 months of your business, and in it, you have your costs, the estimated sales (helped by the sales forecast) and your total expenses for each single month. The last bit of mathematics involves the sales for each month minus the costs and expenses. This gives you the idea of how much finances you will need to keep the company alive at the beginning or how much you would need to break even. This is a little part of what can make up your business plan, so in doing this, which may be a headache, it will save you hassle further down the road, leaving you to flaunt some of that entrepreneurial flair.