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Budget Blunders That Can Cripple A Start-Up

Starting a business is now easier than it’s ever been, but that doesn’t mean that it’s an entirely easy nut to crack! You may have the most solid business or marketing plan of the decade, but if this isn’t backed up by a long-term financial strategy, your promising start-up can quickly collapse on itself. Here are some of the most common business budgeting mistakes that you need to avoid…

Ignoring or Neglecting Immediate Budgetary Needs

While asking for a smaller loan to get your business off the ground can help your chances of getting one, potential investors will always question why they should hand over money for a project that’s going to fail without enough capital! Countless promising start-ups have gone through their seed money without ever coming close to the profit margins they were gunning for, and many of their CEOs have been scared away from their dreams for life. Make sure you’re not leaving out any of the nitty-gritty regulatory expenses, like licenses or specialised coverage from companies like One Sure Insurance. If you’re unsure of how much a certain facet of your business will cost to operate, don’t try to help your chances of a loan by selling your projections short. The guys at the bank have had to approve loans much larger than the one you’re going to ask for!

Overstating Projections

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While you certainly don’t want to sell your business short, it’s also a big mistake to over-promise and under-deliver in your projections. You wouldn’t be the first entrepreneur to make this error, and you certainly wouldn’t be the last! Prospective investors may be fooled in that initial meeting, true. However, in the long run, it’s always the funded company that gets hurt the most. Sure, if you’re brutally honest with your projections, it can mean actually getting your hands on the necessary funding can take a long time. However, when the money does come through, you’ll be able to rest assured that it’s honest money, and enough to kick-start a financial strategy that will keep your business running for years to come.

Thinking that Revenue Equals Positive Cash Flow

In pretty much every transaction, there’s some kind of lag between the finalisation of the deal, and the collection of funds. You probably only have to take a quick look at your online banking page to see this fact in action. This period of lag shouldn’t be a problem, as long as you’re well-prepared for it. Unfortunately, a lot of new entrepreneurs don’t prepare for it, and drive their ventures into some serious cash flow issues. The tragedy in this is that many of these fatal transactions could have been avoided, if only the business owner was willing to wait for another month for the funds to get into their account. A little foresight, discretion, and the wisdom not to take unnecessary gambles, are all you need to steer clear of these costly errors.

As you draft your start-up budget, be aware of these costly errors, and do everything you can to avoid them.