Perspectives from a VC, a Founder and an Entrepreneur.
Thursday, March 21, 2013
5 Financing Mistakes Commonly Made in a Start Up
When you start a startup company, money can be tight, and it is important that you have a plan in place from the very beginning to ensure that you remain fiscally responsible with your finance plans, particularly during the very beginning. Unfortunately, most startups that run into financial problems do so because they do not practice proper financial planning and accounting, and as a result end up making some very serious financing mistakes that can lead to the downfall of a once promising business. Five of the most common financing mistakes that are made by startups include:
Not Budgeting For Operating Costs. One of the most common mistakes made by startup companies is not doing enough planning for operating costs. Many new businesses get ahead of themselves, planning their advertising costs and other more glamorous expenses while overlooking the basic operating costs that determine whether or not their business will even be viable in the long term. Make sure that, if anything, you overestimate the amount of money you will be spending on day to day operating costs, because underestimating those costs could be very detrimental to your business.
Overcharging Or Undercharging. Another common mistake that is made by many startup companies is pricing their services or products far too high, or far too low. Ideally, every startup company should have done enough market research to know the perfect price for their items, but that is not always possible for a company that is working with extremely limited funding. Setting your price too high or too low, in the very beginning will stick with those that come across your service. If you have to drastically raise your prices, they will be less likely to buy knowing that they had a better deal on the table previously. If you lower your prices drastically, consumers will likely feel like they do not know what your service or product is truly worth.