The startup economy is booming in Australia. Driven by innovation it is tipped that by 2033 startups will play a huge role in our economy by contributing as much as $109bn or 4% of GDP and 540,000 jobs.
With this increase in numbers, the failure rate of startups is likely to soar. A report by the International Business Times in May 2017, suggested the failure rate was 50%. One of the reason for this was due to Capital Issues. So can you ensure your startup doesn't fail due to financial reasons?
Here are our top financial tips for startups:
There are number of grants that startups can take advantage of. There are often time consuming and onerous reporting requirements and restrictions on what you can spend the money on. However, this is a cash injection into your business that is often ‘free money’. The body giving the money doesn’t take a profit or ownership share of your business in return for the money.
2. Investment and financial backing
Startups, especially in the tech space require significant funds, particularly for R&D. Often this is more than the owners have or are comfortable investing in the business. Therefore in order for the startup to get off the ground investment is needed. Startups find it very difficult to get bank loans due to the high risk nature of startups. However, there are a wide range and volume of investors available. With an incredible tech solution you can find funding through Incubators, accelerators, Private Equity or even an Angel Investor that is interested in seeing your idea translate to a meaningful enterprise.
Startups come with a range of challenges. It is important that you get the right advice from the start. While it might be tempting to turn to free advice in the beginning, this is usually family and friends, and often ones that don’t have qualification or even experience in running a business. Making sure that you have an expert in your corner for important decisions can actually save you significant money in the future. We recommend ensuring that you have professional financial and legal advice at the beginning and along the way as your business grows. Target a specialist Tech solutions provider as they often understand the intricacies of what your pain points are and can solve problems in line with how fast your moving.
4. Be Lean
Every dollar counts, so it is essential to really scrutinise purchases and keep a close eye on your expenditure. Make sure you are only spending what is necessary. Before buying something assess if you really need it, and could you buy it second hand or borrow one? While cashflow is critical in the beginning (because you probably don’t have any yet), these are good habits to form for the future and will always help your business be more profitable.
If you need financial advice, please feel free to contact us.