Startups seem to come from everywhere these days. Diligent people - young and old - have begun branching out of their comfort zones to follow dreams of success in business. While a small few succeed without incident, more are subject to the harsh realities of finding and maintaining funding for their business. Even the most promising of startups can see a sharp decline, and eventual fall, when a strong financial cushion is not established. With such a staggering rate of failure, it is no wonder potential business owners want to know how to increase their chances of success (and the size of their wallets).
Though the term is used mostly for tech companies in recent years, a startup is any business that has recently opened shop and taken a chance in the deep waters of international trade. It is a chance that often falls flat on its face, especially for startups that need to keep a higher amount of steady cash flow to see progress. Loans are also a hassle to come by from various sources. It's because of this that many small businesses and startups turn to business receivable factoring to help lessen the stress.
The first five years are the worst in terms of gaining and maintaining capital, gaining public interest in the startup itself, and more. While it will never quite equate to a trip down easy street, a low-funded idea can be made or destroyed in that short amount of time. Because a startup deals with rapid international expansion, the ideal climate is one that boasts large amounts of available capital.
Figuring Out the Numbers
In order to discern how much money an individual startup needs to survive, a business plan must be drafted. A business plan is essential to any startup to keep expenses in check and understood. Most startups fail because they run out of resources early in the game, whether they were a hit or not.
Business Insider suggests that a startup have approximately 25% more capital than they initially estimated as necessary. That's after enough money is raised to "hit a set of milestones that puts it in good shape to raise money at a higher valuation during subsequent rounds of financing and stages of growth". Startups change frequently in the face of various factors, and so the amount of capital needed changes as well.
It helps to have a healthy amount of options for financing and funding - combining loans and other financial options, such as invoice factoring services, can help add capital to your overall funding. Invoice factoring services help to cushion a business during rough seasons when waiting for an invoice to be honored can prove detrimental on a large scale.
The amount of money your startup will need to survive will vary greatly depending on the business and what resources you have at your hands. A smart startup will go over every nook and cranny to determine the big picture - and then add 25% more to the estimate to keep them afloat. Keep track of all expenses, financing options, and forecast based on similar businesses, your own successes, and other financial factors. The one thing that no amount of ups and downs can thwart is a truly diligent plan.
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