Each day witnesses numerous startups being created and also many other startups closing down. According to the Worldwide Business Startups report, globally around 137,000 new businesses are formed each day. But unfortunately, a staggering 90% of those close down. And out of that, more than 40% have closed down because of running out of funds, even after getting external funding! Managing funds and creating a practical expansion plan with realistic goals can be an extremely demanding and dynamic process, which has the potential to make or break a startup. Making a startup successful goes much beyond acquiring funds.
Utilising the funds optimally and multiplying it to grow, within the stipulated time frame and the said direction is what leads to success. Companies that fail, do so not because of lack of funds but due to lack of vision and ability to strategise and handle internal pressures along with their finances. They are not able to get a holistic view of things. This is where a mentor comes into the picture.
A mentor’s job is to first lead the company to a strategic growth plan to get funding and then to effectively utilise the same to create a successful business. A mentor offers the quintessential external perspective on growth challenges and bottleneck which is very significant to ensure consistent growth. Here are five ways how an expert financial advisor can help startups to navigate the rough patch and emerge successful and rich.
1) Setting long term, quantified goals
The setting of a long term, the quantified goal is the first step to effective growth and expansion. While setting a long term goal and having a vision is a common starting point for most startups, they often fail to quantify the same, or worse, end up setting hypothetical or vague descriptions, often making the goal illusionary. With a mentor and a financial expert on board, there would be a detailed analysis of the growth trends since inception and the potential, before arriving at a realistic and quantified goal for growth, within a stipulated time frame. This not only ensures that the goals are achieved but also ensures long term vision is realised.
2) Agile approach in execution
While long term planning would involving looking into a distant future covering over 8-10 years, an operational strategy that is agile and can accommodate any seasonal or temporary challenges is important. This helps to ensure entrepreneurs and startups can navigate through these challenges effectively without deviating too much from the original growth plan. With the volatile social-economic environment coupled with the immensely dynamic international market trends, innovations across industries and sectors as well as the changing shape of the global consumer, all are rapidly changing, demanding modern businesses adapt in time to keep pace. A funding expert understands the nerve of the movement and can identify the flow of money and possibilities, thus offering expert guidance to leverage the challenge.
3) Optimisation of resources
As in the marketplace, the home front requires effective monitoring. From internal HR management to expenses on third party vendors and complementary services, all contribute to the number under the ‘debit’ tag of the balance sheet. Monitoring, optimising and budgeting these expenses can go a long way in generating profits at the end of the year. Entrepreneurs or startups usually lack the bandwidth to look into the larger implications of these routine expenses and often an external insight from an expert can help realise the full gravity of the expenses and help optimise them.
Also, Read | 5 essential tips of fundraising for startups
4) Healthy check on liabilities/debts
As a startup business, loans and shoestring budgets with constant liabilities is an expected phenomenon. Often, driven by the urge to grow fast or due to lack of judgement or vision, entrepreneurs and startups end up taking risks that push them deep into debts and unhealthy financial situations which may take years to be solved. As a financial expert and advisor, a mentor can help navigate these tricky challenges, and help draw out a plan which involves calculative risks with a healthy balance of liabilities and debts.
5) Regular quarterly reviews
While long term plans and effective operational strategies are vital to charting a growth plan, regular business reviews are important to keep a check on the growth. Mostly, internal reviews are limited to the performance of subordinates and staff members and financial reviews are put off till the end of the financial year, when a CA offers a profit outcome number along with potential room for growth in the next year. However, it is too late by then.
A quarterly business and financial review by a mentor ensure not only that the business is growing at the pace and in the direction as desired, but it also allows for early identification of challenges and timely resolution with corrective measures, to arrest losses – something that can go a long way in ensuring success.
As in other sectors, the startup and entrepreneurial sector in India are also undergoing massive transformation, thanks to global and national market trends, industry policies, and technology innovations. Under such scenarios, the need for a specialised consultation for business and finance, customised to meet the needs of a startup is increasingly becoming necessary. 2020 is set to see a dedicated effort in the direction, driving the growth of customised start-up consultancy as a service.