Misutilizing Your Funding Capital? Startups Beware !


Most startup businesses are going to fail. That is not a statement that most people want to hear. People start a business with the hope that it will be successful. Creating a successful business requires many different things. It requires an idea and a product or service that people want. It requires marketing the business so people can take advantage of what is being offered. It requires managing the business to make sure it is doing what it is supposed to do. It involves evolving the business to make sure that the success continues. One thing is more important than all of these others things. A startup business must have the money it needs to get started and to run until the business is supporting itself.

The amount of capital funding that a business will need varies widely. It depends on what type of business is being started and where the business is being started. The number one reason that businesses fail is a lack of money. Even when businesses start out with enough money, they often make several mistakes that cause their funds to run out. Learning how to avoid the mistakes when it comes to utilizing the startup funds could be the key to turning a successful startup into a successful long term business. These are some of the most common mistakes that startups make when it comes to using their capital funding.

  • Adding Employees too soon – Good employees are essential to a successful business. A big business may need a lot of employees, but a startup business needs to think about when is the right time to hire them. It does not make sense to hire a sales force before you have paid for the products that they are going to sell. Funds spent on adding excess workforce will take money away from other areas that it is needed. It is a mistake that can be difficult to overcome. Create a plan, when to add employees to the different sectors of the firm to avoid this problem.
  • Mismanaging product – It may not always be easy to determine exactly what and how much product a startup will need. It is can be hard to manage the marketing of the products or services with the needs of the customers. Startups can easily fail if they have too much product at hand and too much money invested in it or not, having the product on hand when the customer wants it. Either situation can cause a business to fail quickly. Make sure that you are always monitoring your inventory and paying attention to what the customers are asking for. Set up a system to reorder products efficiently ad quickly and adjust marketing plans accordingly.
  • Bad accounting – A startup business has plenty of money going out and coming in. They have to make sure they are paying their bills in a timely fashion. They have to account for all of the inventory they have on hand. It is a difficult thing to do and is often something that is handled by the person in charge of the startup initially. That person is already dealing with many other facets of the startup and may not manage their accounting needs properly. Mistakes at this stage can be very costly and should be avoided. A business can find software that makes it easy to handle the accounting needs of most startups.
  • Spending too much money on office space – many startups think they have to look like the big businesses that have been around for many years. They will invest in a fancy office, expensive furniture and expensive phone and computer systems to make them appear bigger than they are. Instead, startups can always opt for cost-effective methods such as cloud phone systems with office 365 integration in order to have an uninterrupted 24/7 communication along with systematic storing and retrieving of data. Likewise, there are many technological tools now-a-days such as conferencing tools, marketing tools and evaluation tools that help the startup build on their success.
  • Outsourcing – A startup may think they need to outsource many things to help them become successful. They often try to do this before they have the actual need for these outsourced services. A business can turn to many online tools that will handle needs such as accounting, marketing and other things that eventually may need to be outsourced as the business grows.

While all of these obstacles can cause a startup to use up their funds too quickly they can all be overcome. The key is to have the right plan for the startup and for how the money will be used. If you have ideas about this, please share them with us.

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