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Decoding Startup Costs: Should You Capitalise or Not? Embarking on a new business venture is an exhilarating prospect, but the financial landscape can be complex. One pivotal question for entrepreneurs revolves around whether to capitalise startup costs. Defining Startup Costs: Startup costs encompass the expenditures associated with establishing a new business, spanning everything from legal fees and market research to office space and equipment. Essentially, any cost necessary to initiate the business falls under the umbrella of startup expenses. Understanding Capitalization: Capitalization involves distributing the cost of an asset over its useful lifespan rather than recognizing the entire expense at the time of acquisition. In the context of startup costs, capitalization entails treating these initial expenditures as an investment, amortising them over time rather than expending them immediately. Pros of Capitalising Startup Costs: -Financial Impact Smoothing: Capitalising startup costs allows businesses to spread the financial impact of these expenses over several years, which is especially advantageous in the early stages when revenue may be limited. -Improved Financial Reporting: Capitalization can result in more accurate financial statements, reflecting the ongoing value derived from initial investments.Tax Advantages: Some countries provide tax incentives for businesses that capitalise startup costs, potentially reducing taxable income and offering financial flexibility. Cons of Capitalizing Startup Costs: -Deferred Expense Recognition: Critics argue that capitalising startup costs may defer the recognition of expenses, potentially obscuring the genuine financial state of a business in its initial phases. -Complex Accounting Procedures: Capitalization involves intricate accounting processes, demanding meticulous documentation and adherence to accounting standards, which can be burdensome for small businesses. The full article is on techgetty’s blog. Use this link to read: www.techgetty.com #techgetty #startup #capitalization

Cash Flow Management for Startups: Strategies for Staying Liquid Effective cash flow management is essential for the survival and growth of startups. Let's explore practical strategies to help your startup remain liquid and thrive. The Importance of Cash Flow Management CB Insights' 2021 analysis of over 110 startup post-mortems revealed that 38% of startups failed due to poor cash flow management. This underscores the critical need for startups to manage their cash flow effectively. Common Cash Flow Issues Overestimating Revenue: Many startups overestimate their potential revenue, leading to cash shortfalls when projected income doesn’t materialize. Underestimating Expenses: Startups often underestimate operational expenses, quickly draining available funds. Delayed Receivables: Payment delays from clients can create significant cash flow gaps. Poor Financial Planning: A lack of thorough financial planning and forecasting leaves startups unprepared for financial challenges. Strategies for Effective Cash Flow Management Maintain a Cash Reserve Establishing a cash reserve can provide a buffer against unexpected expenses and revenue shortfalls. Jason Lemkin, Founder of SaaStr, emphasizes the importance of monitoring the burn rate and maintaining a conservative approach to spending. Regular Financial Forecasting Conducting regular financial forecasts helps anticipate cash flow needs and adjust strategies. Brad Feld, Co-founder of Foundry Group and Techstars, notes that understanding the story behind the numbers is crucial for navigating uncertainty. Efficient Accounts Receivable Management Implementing strategies to accelerate receivables, such as offering early payment discounts, can improve cash flow. Laura Behrens Wu, Co-founder and CEO of Shippo, shared how stricter credit policies and early payment discounts helped stabilize their cash flow. Expense Control Regularly reviewing and controlling expenses helps maintain a healthy cash flow and avoid unnecessary expenditures. Inkle, a financial technology company, likens expense categorization to organizing a financial closet, essential for accurate financial planning and informed business decisions. Conclusion Effective cash flow management is crucial for creating a stable financial environment where your startup can thrive. By implementing these strategies, you can better manage your cash flow, avoid common pitfalls, and establish a solid foundation for long-term success. Richard Branson: "Never take your eyes off the cash flow because it's the life blood of business." #StartupSuccess #CashFlowManagement #Entrepreneurship

Each stage of business growth requires a different level of investment Credit to Brandon Chase, follow him for more insightful content. ------ Original post below 👇🏼 Each stage of business growth requires a different level of investment. 𝗦𝘁𝗮𝗴𝗲 𝗜 - 𝗘𝘅𝗶𝘀𝘁𝗲𝗻𝗰𝗲 As the owner, you’re involved in everything: operations, marketing, finance, sales - you name it. You’re investing a lot of your time to establish processes and awareness. You’re talking to customers and maybe even doing deliveries yourself. You are the investment. 𝗦𝘁𝗮𝗴𝗲 𝗜𝗜 - 𝗦𝘂𝗿𝘃𝗶𝘃𝗮𝗹 At this stage, you’ve hired a handful of key team members to help you. You’re transferring your processes and best practices to them, investing in training, culture, and documentation. Your team is the investment. 𝗦𝘁𝗮𝗴𝗲 𝗜𝗜𝗜-𝗗 - 𝗦𝘂𝗰𝗰𝗲𝘀𝘀-𝗗𝗶𝘀𝗲𝗻𝗴𝗮𝗴𝗲𝗺𝗲𝗻𝘁 This is the time to be profitable without being involved. So you need to determine the efficient systems and tools that your team can use to make you the most money with the least amount of your time. You’re investing in systems. 𝗦𝘁𝗮𝗴𝗲 𝗜𝗜𝗜-𝗚 - 𝗦𝘂𝗰𝗰𝗲𝘀𝘀-𝗚𝗿𝗼𝘄𝘁𝗵 Your core operations are doing well and there’s now an opportunity to expand. So you need to scale your systems, models, and teams without sacrificing quality. You’re investing in growth and expansion. 𝗦𝘁𝗮𝗴𝗲 𝗜𝗩 - 𝗧𝗮𝗸𝗲-𝗼𝗳𝗳 Your company is growing faster than ever and you need to maintain that momentum. You need to finance new products, new markets, and new technology. You’re investing in innovation. 𝗦𝘁𝗮𝗴𝗲 𝗩 - 𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲 𝗠𝗮𝘁𝘂𝗿𝗶𝘁𝘆 This is the point to explore big partnerships, acquisitions, or new ventures. You seek ways to be even more efficient and capture a larger market. You’re investing in new business opportunities. The common denominator in all these stages is: ▶ Money You need money to start a business, hire team members, expand your operations, invest in innovation, and explore opportunities. Agree or disagree? Credit: Neil C. Churchill & Virginia L. Lewis Source: Harvard Business Review hashtag#finance hashtag#fundraising hashtag#money hashtag#startups hashtag#business hashtag#entrepreneurship Stay updated with The Startup Anatomy for top content on: 🚀 Startups, Founders Story 💸 Investors, VC, Startup Angel Funding

Smart comes second, sheer effort comes first. There are two ways to make money, the smart way and the non-smart way. The smart way isn’t very accessible, it requires a unique idea of brilliance, with the right backing at the right time or by putting existing funds into investments to grow wealth. It’s mostly VC backed startups where you spend someone else’s money to launch something groundbreaking. They usually fail, but if they do succeed, it’s big wins. The government only backs this type of innovation with grants. It’s the 1% route. Next is the non-smart way, where you launch a service or commerce business. It’s not groundbreaking, but has purpose driven by your passion. You live your business and it costs you nearly everything. You make smarter decisions as you grow, but winning is down to sheer effort and not giving up. The government doesn’t back this business, although SMEs maintain our economy. You finish first because you’ve built a sustainable business through grit and you can exit knowing the acquisition price is solid. I grew my business the non-smart way and I prefer working with these types of clients. Real people investing their hard earned money into their future. I’ve had meetings with many VC backed leaders and while some of them are brilliant, I often thought who’s daft enough to give this prat 500k. I’m no business tycoon, but none of the funded ventures we didn’t think were a good fit are actually still around. Most of the SMEs are. Grit & Passion can’t be brought It wins every time

Anyone familiar with the start-up eco-system, would have often heard the term, ‘Founder Quality.’ What exactly does Founder Quality mean and what are the best ways to assess it? I’ve been lucky enough to work in the investor space, across different countries. It is clear from my experience with the Oxford Seed Fund in the UK and with my current role building Prath Ventures, in India, that this attribute, transcends geographical boundaries. I’ve drawn up a list of some of the many factors that play a pivotal role in defining the calibre of a Founder. 📑 Promoter’s Background: Understanding a founder's academic and professional background provides invaluable context. It allows investors to gauge the founder's network capabilities, hustle, theoretical knowledge, and technical or practical skills within their category. 💡 Category Awareness: Profound knowledge of one’s domain is crucial. This includes understanding competitive advantages, the real Total Addressable Market (TAM), how the brand could foster sector growth, and how the category has evolved in other markets. Every detail counts! 💰 Grasp on the business: Comprehending the crucial aspects and nuances of running a business is vital. While a hold on the finances is important for a founder, having a grasp on the business goes far beyond just that! Knowledge of the intricacies like vendors, supply chain, innovations in the field, and customer feedback offers a holistic perspective. 🤼 Team Building Ability: People are the spine of any business. Can the Founder identify, hire, and retain the right talent? Can they keep a team motivated? Fostering collaboration is important for unlocking growth potential. Finding and hiring the right people can prove to be a total game changer. 🗨 Soft skills and traits: The founder’s storytelling ability and the clarity of vision is essential along with having a growth mindset, resilience, passion for what is being built, and strategic thinking is very vital. The importance of humility and courage cannot be overstated. An openness to feedback and a relentless pursuit of excellence often distinguishes standout founders. ⛑ Commitment and Courage: A little bit of 🪄 and a little of crazy add to the secret sauce. Does the founder have the courage to boldly venture where no one has gone before? Can they remain steadfast to that courage with complete commitment and dedication? It takes a lot of courage, persistence, and resilience to be able to walk the tightrope that is required to make a company succeed. I'm keen to learn about your perspectives on evaluating founder quality. What qualities do you prioritize? #startupcommunity #venturecapital #investing #startupecosystem #FounderQuality #startupinsights

𝗦𝘁𝗮𝗿𝘁𝘂𝗽 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗘𝘀𝘀𝗲𝗻𝘁𝗶𝗮𝗹𝘀 💼 Understanding key financial metrics is crucial for every startup's success. In this article, we explore essential financial indicators that can guide your business decisions and improve financial health. From gross margin to burn rate, mastering these metrics can empower startups to navigate challenges and achieve sustainable growth. ✅ Gross margin reveals the profitability of your products or services. ✅ Burn rate measures how quickly your startup consumes cash. ✅ Customer acquisition cost helps evaluate the effectiveness of your marketing efforts. ✅ Churn rate indicates the rate at which customers stop doing business with your company. ✅ Runway calculates how long your startup can operate before running out of funds. With these financial metrics at your fingertips, your startup is poised for success. By tracking, understanding, and optimizing these key indicators, you'll steer your venture toward sustainable growth and profitability, ready to conquer any challenge on the horizon. Read the rest of the article from Entrepreneur Media written by Nick Chandi to know more! (ctto) Share your thoughts in the COMMENTS below. ⬇️ #startups #venturecapital #innovation #smallbusiness #entrepreneurship #finance

𝗦𝘁𝗮𝗿𝘁𝘂𝗽 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗘𝘀𝘀𝗲𝗻𝘁𝗶𝗮𝗹𝘀 💼 Understanding key financial metrics is crucial for every startup's success. In this article, we explore essential financial indicators that can guide your business decisions and improve financial health. From gross margin to burn rate, mastering these metrics can empower startups to navigate challenges and achieve sustainable growth. ✅ Gross margin reveals the profitability of your products or services. ✅ Burn rate measures how quickly your startup consumes cash. ✅ Customer acquisition cost helps evaluate the effectiveness of your marketing efforts. ✅ Churn rate indicates the rate at which customers stop doing business with your company. ✅ Runway calculates how long your startup can operate before running out of funds. With these financial metrics at your fingertips, your startup is poised for success. By tracking, understanding, and optimizing these key indicators, you'll steer your venture toward sustainable growth and profitability, ready to conquer any challenge on the horizon. Read the rest of the article from Entrepreneur Media written by Nick Chandi to know more! (ctto) Share your thoughts and COMMENT below. ⬇️ #startups #venturecapital #innovation #smallbusiness #entrepreneurship #finance

Hi well wishers I will be glad to interact with my article for understanding what if ? The blueprint for understanding how the actually costs used for small startup business are revealed, Unveiling the Blueprint: Understanding Small Business Startup Costs Embarking on the journey of launching a new business is an exhilarating endeavor filled with boundless potential. Yet, amidst the excitement of bringing innovative ideas to life, many entrepreneurs often overlook the critical aspect of meticulous planning and budgeting to manage expenses effectively. This oversight can lead to precarious situations, as relying solely on anticipated revenue streams to sustain operations may yield disappointing outcomes, as indicated by small-business survival statistics. To navigate the intricate landscape of startup costs, it's imperative to delve into the intricacies of what constitutes these expenditures. Startup costs encapsulate the financial investments required to initiate a new venture, encompassing both one-time outlays and ongoing expenses. These may include but are not limited to equipment procurement, marketing initiatives, licensing fees, and personnel salaries. The U.S. Small Business Administration (SBA) provides invaluable resources, including tailored templates, catering to various startup categories such as brick-and-mortar establishments, online enterprises, and service providers. Leveraging these resources can serve as a solid foundation for entrepreneurs to commence their financial planning journey. When dissecting small business startup expenses, it becomes evident that different business types incur distinct sets of costs. For instance, while a professional services firm may necessitate office spaces, an e-commerce venture may require warehouse facilities. However, amidst this diversity, certain expenses emerge as ubiquitous across industries, such as research costs, licensing fees, and marketing expenditures. Navigating the Terrain: Understanding One-Time and Ongoing Expenses One-time expenses represent upfront investments essential for launching the business, including research endeavors, borrowing costs, license fees, and equipment purchases. Conversely, ongoing expenses entail recurrent financial commitments critical for sustaining day-to-day operations, encompassing marketing endeavors, payroll, insurance premiums, utilities, technological infrastructure, and inventory management. The Calculative Conundrum: Estimating and Managing Startup Costs Accurately estimating startup costs serves as the cornerstone of financial planning, providing entrepreneurs with a comprehensive understanding of the capital required to commence and sustain operations. This process involves meticulous research to ascertain the real costs associated with each expense category, thereby enabling entrepreneurs to make informed decisions while minimizing expenditures. #snsinstitution #snsdesignthinkers #startup #designthinking

Starting your own business vs investing into start ups, which can give you financial freedom (if successful)? Both starting your own business and investing in startups have the potential to lead to financial freedom if successful, but they come with different risks, responsibilities, and requirements. Here’s a breakdown to help you understand the differences: Starting Your Own Business Pros: Control: You have full control over decision-making and the direction of the business. Potential for High Returns: If your business succeeds, the financial rewards can be substantial, potentially outstripping what you might earn from investments. Personal Fulfillment: Building something from the ground up can be deeply satisfying and allows for creative freedom. Cons: High Risk: Many new businesses fail, and the financial and personal stakes can be high. Time and Effort: Requires a significant commitment of time, energy, and resources. Complexity: You'll need to handle every aspect of the business, from product development to marketing and financial management. Investing in Startups Pros: Diversification: You can spread your investment across multiple startups to mitigate risk. Less Time-Consuming: Once your investment is made, the day-to-day responsibility of running the business falls to someone else. Potential for High Returns: Successful startups can provide significant returns on investment, sometimes outpacing traditional investment avenues. Cons: High Risk: Startups often fail, and early-stage investments can be particularly risky. Liquidity: Your money may be tied up for a long time, as startups typically don’t go public or get acquired quickly. Less Control: As an investor, you have limited say in the daily operations or strategic decisions of the business. Key Considerations: Risk Appetite: Starting a business usually involves concentrated risk in one venture, whereas investing in startups allows for risk diversification. Time Commitment: Running a business is time-intensive, whereas investing might fit better for someone looking to be less involved in day-to-day operations. Expertise and Interest: Your background and interests might better suit one option over the other. For instance, if you have a new business idea or a niche skill set, starting a business might be more appealing. Financial Resources: Initial capital requirements can be significant in both cases, but being an investor might allow you to commit smaller amounts to multiple ventures. Ultimately, achieving financial freedom through either avenue depends greatly on your individual circumstances, including your financial situation, business acumen, network, and ability to weather financial instability. Both paths require due diligence and a clear understanding of the potential risks and rewards.

How often do you get to hear that a service based start-up got funding!! Yes it is a hard truth that service based companies find it rather difficult to secure funding. Why? Let us look at some of the hurdles- 1. Proving Scalability: Service based company can depend on a single or handful of people to provide services. Thus investors often doubt whether service-based businesses can grow big. It can be hard to convince them you can scale up. 2. Lack of Physical Assets: Service start-ups usually don’t have many tangible assets like property or equipment. This makes it difficult to provide collateral for traditional bank loans. 3. Validating Revenue Model: Showing a sustainable and recurring revenue model can be tricky, especially in the early stages when your business is still finding its footing. Service based business can pick up immediately or sometimes can take to scale up. 4. Talent Acquisition: Service based company relies heavily on talent. Investors may worry about this dependency and the attrition. Hiring and keeping top talent in a competitive market can be risky. 5. Competition from Established Players: Convincing investors you have an edge over well-established service providers can be a tough sell. Service depends on brand value a lot, thus customers weight towards going for a known name rather than a new player. Despite these challenges, many service-based start-ups have successfully secured funding. They do this by crafting strong pitches, showcasing innovative business models, and demonstrating a deep understanding of their target market’s needs. 1 thing that is changing the game is introduction of technology in this industry. How? lets keep that for the next discussion. Have you faced similar challenges while seeking funding for your service start-up? #servicebasedbusiness #startup #funding