Each month, over 500,000 new businesses are launched. Just over 80 percent of them make it past their first year. For the ones that do overcome the initial startup challenges, their next step is often growing their business.
Approximately 50 percent of small businesses anticipate or plan on growing, according to a report by TD Bank. For those that do have plans to grow their businesses, securing the right tools is essential to making it a success. This includes drafting the most accurate growth plans, sourcing the right talent, and of course, accessing the right financial tools to fund it all. Making the right preparations and having the right financial tools can make all the difference when it comes to your choice of funding for your start-up and its growth plans.
Remember To Prepare An Accurate And Adjusted Cash Forecast
With an overwhelming amount of startups failing due to mismanagement of their cash flow, the importance of a well-prepared and accurate cash forecast cannot be understated – particularly in times of growth. A good cash flow forecast is important: it lets you know whether your business can afford to pay for these growth plans. If there is a shortfall in cash, it would indicate the need to seek additional financing, and therefore kickstarts your search for the perfect startup funding option. Cash flow forecasting also helps business growth, since it helps you to spot potential issues during the expansion phase.
Ensure You Choose The Best Business Checking Account
Many small business and startup owners use their own money (in addition to external financing) to launch their business. While it is a common practice, it can also be fraught with complications. According to a survey by Seed, 63 percent of entrepreneurs use the same bank for their business and personal checking accounts. Another 32 percent do not separate their business and personal checking accounts at all. For a growing business, this clouds the perception of business growth, and can present significant tax and legal liabilities.
Separating your business and personal bank account also makes it easier to manage your business finances and make more accurate budgetary decisions in the growth process. It also helps to build your business credit, which is helpful if you will be seeking additional financing. When it comes to choosing the best business checking account, Creditful reviews (https://www.crediful.com/best-checking-accounts) will help you pinpoint the features you want in a business checking account and the best matches on the market, including factors like online usability, low-cost fees, and high-interest rates.
Err On The Side Of Caution With Ample Financial Contingency Planning
As with any aspect of business planning, business owners should prepare themselves and their businesses for all eventualities. This relates to not just having a few options for your startup’s growth plans, but also providing a financial cushion for your growth plans. When using your cash forecast and projections to estimate the required financing, remember to account for market inflation and a standard incidental fee.
The percentage you add will be dependent on the industry your startup operates in and the risk profile of your growth plans. For instance, construction companies tend to add 5-10 percent of their total budget as a contingency amount. Using a contingency reserve calculator can help you do this. It is also recommended that you draft or amend your business’ financial contingency plan to include any new potential risks and additional resources you may be adding to your startup.
Expanding your startup can be exciting and daunting at the same time. Getting the financing right during business expansion means not just having the money to do so: it also refers to having the right financial safeguards and tools in place to make your expansion a success. Do it well, and growing your startup will become a lot easier to achieve.
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