No matter how great your ideas, if you do not know how to handle your finances your startup is doomed to failure. Cash flow troubles can sink even the best startup. If you want your business to succeed, you need to pay close attention to the money coming into your business and the money flowing out.

Smart money management comes naturally to some entrepreneurs, but others are not so lucky. Whether you are currently running your startup or still in the planning stages, here are some tips you can use to take control of your cash and keep your business running smoothly.

 

#1. Create a Rainy Day Fund

No matter how tight your cash, it is important to set up a rainy day fund for your business. One of the biggest challenges entrepreneurs face is uneven income, and having cash on hand will make it easier to weather the down times.

Many startups find that their income fluctuates quite a bit from month to month. Once you have some experience under your belt, you may see a patterns emerge that makes it easier to put money aside for the inevitable rainy day. In months where your income rises above a baseline level you establish, you can take some of that extra cash and put it in the bank. When your income drops below baseline, you can pull from that rainy day fund to see you through.

 

#2. Create a Business Plan Before You Start

A concrete business plan is key for your company flourish and keep the cash flowing. If you do not yet have a business plan, now is the time to create one. If you already have a business plan, it is a good idea to have your mentor take a look at it. If you do not have a mentor, you can find one by joining a local business group. Anyone who is willing and experienced can give you great insight to the overall concept of your plan, and may even help you dig into more of the specifics.

A good business plan is fundamental for any startup. If you plan to seek financing or attract investors, you will need a business plan to show the bankers and venture capitalists. The business plan should outline everything people need to know about your startup, from how you plan to attract new customers to the experience level of your executive team.

 

#3. Know Your Market

No matter how good your product or service, without a solid marketing plan your startup is doomed to failure. It is not enough to create a killer product. You need to let the world know how great that product really is.

That is where marketing comes into play. You need a solid marketing plan in place to get your new business off to a great start and build your cash flow.

Knowing your market will be key here. Hopefully you have already done the research and learned as much as you can about your potential customers and what they want. Reaching out to customers across multiple platforms, including social media, websites, blogs, newspaper advertising, radio and TV, is a smart way to grow your startup quickly and build the cash flow you will need for the future.

 

#4. Develop Multiple Streams of Income

No matter what the nature of your business, developing multiple streams of income can help you weather the financial storms. Even if you do not think your startup is conducive to developing more than one stream of income, you should spend some time thinking about it and developing a plan.

If you run a restaurant, you could create a line of takeout foods and reach out to local grocery stores. If you own a brick and mortar pet store, you could branch out into related services like pet grooming, dog walking and pet sitting.

Developing these multiple streams of income can be very important, especially for startups with a seasonal product line or an unpredictable cash flow. Having more than one source of income is a great way to smooth out the bumps and reduce the stress of being an entrepreneur.

 

#5. Have a System to Track Receivables

Losing track of your receivables could be the kiss of death for your startup. Before you serve a single customer, you need to have a system in place to track the amount you are owed and get the money you deserve.

Whether you use a simple spreadsheet or hire a small business accounting firm, (like us!) it is important that your receivables are looked at carefully. Do not wait for months to pass before seeking payment. The longer you wait, the harder it will be to get the money you are owed.

No matter what the nature of your startup, developing a strategy for managing cash flow and controlling your expenses is critical to your success. Chances are your new startup is not flush with cash. If you want to succeed you will need to make every penny count and make sure every dollar you bring in is working as hard as it can.

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