It's a myth that to make money you need to spend a lot of it as well, but it does take some when it comes to business growth!
The key to making money simply depends on the business model, market, and industry trend you may not even need money for growth, but you do need money for rapid startup growth.
How To Set Realistic Financial Goals for a Startup Business?
Sales growth indeed does half the work, but not all of it, there are a lot of other factors that you must consider for the overall growth of your startup. You need a proper funding source for growth.
Small steps make big changes, first of all, you have to pay your vendors before your customers pay you, and this cash flow conundrum forces fast-growing companies to seek bank financing or equity sales to finance their growth. Failing to do so may put your business at risk of running out of money.
One fact that most startup founders go wrong with is, any company can do extraordinarily well with external fundings, even more than it can do with its sales revenue. So, if you are actually planning fast growth for your startup, you must set your financial goals!
This article will discuss all the basic steps that startups should follow to set realistic Financial projections
Money Making Growth:
The basic financial growth of every startup business involves earning more revenue than you spend on your operating expenses.
The factor that you must keep in during profitability growth is the revenue sources, i.e. sales, interest on investments, rental income, etc., and project a specific number for each source.
The next step is evaluation of all the operating expenses, i.e. payroll, rent, materials, transportation, advertising, utilities, interest payments, licenses, and taxes, and mention the projected value for each.
Once you have the revenues and expenses projections, you can set some realistic goals (including increasing sales and decreasing expenses), which save money for expansion or capital reserves.
Cash Flow Objectives:
The term smooth cash flow means the ability of a startup to maintain adequate operating capital to cover basic expenses. As there are seasonal fluctuations, delayed payments, etc., and these factors can affect the normal cash flow, it is important to set some goals to limit off-season operations.
This objective is not just about maintaining an easy capital flow, but also preparing for emergencies, and so there should be a proper crisis funding plan in place.
Business Expansion Strategy:
Most of the startups look for stable growth, and financing to expand their business. There are two growth models that businesses follow, Some businesses work on slow growth models while others want rapid growth which demands a good amount of funding.
If a business aims for slow growth, then it may use a small portion of sales revenue for growth, however, if rapid growth is in your plan, you must seek the right financing for your startup.
Some businesses have some specific objectives to advance their operations, i.e. after leasing a space the entrepreneur learns that the building owner wishes to eventually sell the office space.
So the business establishes the goal of buying it at some point in time. Such specific goals that involve investment must have a proper ROI projection to accommodate the requirements.
The Bottom Line:
So, if you’re planning to take your business in the right direction which leads towards growth, setting your financial goals is a must. I hope the above points would make it easy for you to set financial goals for your startup!