Early stage companies often commit these 5 mistakes. How can you avoid them?
In the past years the world economy has been experiencing one of the longest periods of flourishing in the 20th and 21st century.
However, it seems that this year we have come to a turn, and therefore we must keep even a closer eye at our finances than before. Even small mistakes can make a difference, so why not learn from others and straightforwardly avoid them?
1. Always update business plans and budgets
As the wise Heraclitos once said:
“Change is the only constant in life.”
A lot of time may have passed since, but the quote describes perfectly the life of an early stage company, as their product and offers are evolving. These changes often have a significant impact on your business plan and budgets, which should be updated based on them. One of the biggest mistakes is if you change your strategy yet somehow you forget to analyze the financial impact of the change on the business plan and budgets. What does the result look like? A complete mess – your goals become unclear and your finances and the strategy itself become a total chaos. In the worst case scenarios, the company might damage its cashflow and end up in serious financial trouble.
2. Spending too much? Keeping track of big and small expenses is key
Do you usually watch out for significant expenses? Well, you are doing a great job. How about the small, seemingly insignificant ones? While some new subscriptions and one-off expenses might not seem like a big deal, imagine spending just 100 EUR more on a weekly basis on office supplies. They can add up to more than 5000 EUR over the year.
Quite a budget to boost your product or go for a fancy teambuilding trip, isn’t it?
3. Time is luxury goods. Spend it wisely
Watch out for this extremely common mistake within the startup community. The founder team often underestimates the value of their time. If the founders focus too much on daily operations and small things, the product development activities might be delayed, which implies a later revenue stream.
We advise you to go back to the good old priority lists before jumping on all the tasks at once. The majority of them could be automated or outsourced more effectively.
4. Enter the market as soon as you can. Thank us later
From day 1 you should have a clear plan on how you are going to generate revenue.
Even the best idea in the world is really hard to fundraise for without a clear revenue stream.
Do not wait for the excellent product, but always try to enter the market as soon as possible with a MVP and start to generate revenue. As a nice bonus, it gives you early feedback on your product from your potential customers and you’ll be able to fix or/ modify it based on their needs.
5. Never too early to start fundraising
A typical fundraising process, especially in CEE lastst 3-6 months. To start thinking about fundraising, when you have cash for just 2 months in your bank account, is simply way too late. Keep in mind that the fundraising process needs a huge involvement of the founder team, and typically consumes a lot of effort and time.
Always think ahead and focus on your business activities, which can help you fundraise in the future (the points above will definitely help you).
To wrap it up spending your capital is not a sign of weakness at all. In fact, capital investments are absolutely essential to develop and scale a great product. The key is to always keep a close look on the spending and think a few steps ahead in terms of fundraising.
Outsourcing marketing or HR activities to professionals has become a standard, so why not trust the experts with your financial reporting, planning and advising you on how to perform better?