• Secure funds

There is an old saying that "Cash is King" that entrepreneurs need to be mindful of. No matter how fantastic be the business model of the company, book profits are not enough, it needs to ensure sufficient cash flow to pay its suppliers, employees, etc to survive. If it fails to secure cash, the business will eventually fail. While a startup can have negative cash flow from the business, it would need to secure funds from investors, but investors would run out of patience if the business fails to generate cash.

 

It is important for entrepreneurs to secure financing for the business. While entrepreneurs invest in their own funds, in order to scale up the business external investors may be needed. This financing can be in the form of debt or equity, both of which have their pros and cons.

 

• Value time

Another old adage "Time is Money" is something entrepreneurs need to be mindful of. They will find themselves short of time and need to assess whether an issue is worth spending their time on. Assigning a value on their time can help them assess how much time they should invest in an activity, as well as arrive upon a delegation framework to help them with quick turnaround time.

 

While an entrepreneur sets up a business to build wealth, it is important for them to recognize their dual roles, that of investors as well as a full-time CEO. The payoff for the first comes from the wealth generated from the business- read that as the valuation of the business.

 

• Track inflow, outflow

At the initial stages of launching a business, an entrepreneur needs to keep a careful track of how the business model evolves and how funds are allocated. In short, "track revenues and spending" until you arrive upon a consistent pattern. One needs to keep a careful track of inflows and outflows to ensure balanced cash flows as well. An intelligent investment would be building a proper MIS and accounting software, in addition to hiring finance professionals.

 

It is important to have a long-run perspective and have a scalable business model, with limited fixed costs. This can be achieved by various tactical elements like opting for co-working spaces or an optimal model for fixed vs variable pay for employees.

 

• Diversify wealth

While new entrants may enthusiastically anticipate success, they should be ready for failure. It is estimated that about 90% of start-ups fail in the first five years of starting their business.

 

Entrepreneurs should diversify their wealth in order to shield themselves from the ups and downs of their business. For this, they need to have a robust asset allocation plan, depending on their age and risk tolerance. They should invest in equities, debt, and real estate. For a young entrepreneur whose age is 25, up to 80% of their allocation can be inequities. In order to achieve this objective, consider utilizing the services of a financial advisor.

 

• Set goals

Lastly, an entrepreneur setting up a startup needs to set financial goals, while some of this will undoubtedly be part of their vision, like to be a unicorn within five years. However, for an actionable plan will also have milestones to achieve this goal, against which progress can be tracked.