The startup scene can be daunting, especially when you don’t have a lot of money to spare. But that doesn’t stop the thousands of tech-savvy entrepreneurs and innovators from attempting what scares them most.
And it doesn’t stop you, either.
With the odds stacked against you, you need to do everything you can to stretch your money wisely. Here are two smart money decisions to help you keep your startup afloat.
1. Think about Location
Silicon Valley is a natural choice for some startups. Nestled in the San Francisco Bay Area, it’s where Google, Facebook, and Apple call home. By calling it your startup’s home as well, you’ll be neighbors with the best and brightest in your field.
Networking with these big wigs plays a huge part in the success of your business, but it doesn’t trump your bottom line. Being able to meet with influential people and peers won’t mean much if you blow your budget on real estate.
The Bay Area has the highest cost of living in the country. It also boasts the highest cost for a one-bedroom in the entire world, according to a recent Zumper report.
But don’t think your dreams are dashed just because you can’t afford California. Plenty of venture capitalist and founders are experiencing the same budget crunches in the Bay Area. They’re moving to cheaper, less busy parts of the country to escape it.
By following their lead, you stand to save on living costs without missing out on opportunities.
2. Keep Your Personal Finances Separate
When your startup’s your baby, it’s easy to invest every little bit of yourself into your business — including personal savings. While savings may play a role in getting your startup off the ground, think carefully how they factor into your business later on.
Emptying your personal savings to cover your startup’s failings is a bad idea. Throwing money at a problem doesn’t solve the real reason why you have a deficit. It only masks it until both your professional and personal budgets are off track.
Without savings, you won’t be ready if something unexpected happens in your home life. In an emergency, you may be able to find an online line of credit to help. But there are pros and cons to any line of credit, including ones you find online. You should learn about the pros and cons of an online loan before you take one out.
A far better idea is to focus on your burn rate. This essential metric is a good indicator of your startup’s health. And while a burn rate is expected when you’re first getting off the ground, it shouldn’t stay the same as you grow.
The money you raised through VCs and other funding sources should pay your bills long-term until you start turning a profit. That’s what those funds are there for.
Be Startup Savvy
Starting out on your own is rarely easy, and its never cheap, so you have your work cut out for you. But you can make it a little less stressful when you remember these tips. They form the basis of a solid money management plan that centers around smart decision-making and investments. Together, these will help you and your startup survive the grueling pace of the FinTech bubble.