Worthworm Wisdom

Insights for entrepreneurs & investors

Brazen Careerist: Startup Advice: 3 Financial Tips for Long-Term Success

Posted by wwadmin on 2014-09-24 21:36:25

You’ve decided to turn your great startup idea into a reality, congratulations! As you prepare to give yourself over to the life of an entrepreneur, some of the biggest challenges you’ll need to prepare for are the financial ones. And not just how to get your great idea up and running — how to transform it into a successful company.

Between crowdfunding sites, startup accelerators, investor meetings and good old fashioned bootstrapping, you have a number of ways to successfully launch your product or services to the public.

But what about ensuring you can launch a company with the ability to survive long-term? The truth is, many great ideas fizzle out because funds are lacking, and lesser ideas succeed because the people behind them demonstrated the right know-how when it came to navigating the financial realities of entrepreneurial life.

Consider the next three tips as you prepare to seek investments and secure the funds needed to compete in the competitive startup landscape. Do so and you’ll give yourself the best chance at long-term success.

1. Don’t overestimate the value of your startup

Enough startups make million, even billion dollar headlines that it’s tempting for first-time entrepreneurs to seek more money than the company is actually worth. If a simple messaging app like Yo can raise a cool 1.5 million in a short few months with an estimated valuation somewhere between $6-10 million, it’s understandable to think your venture could too.

But while Yo might have been the sleeper hit of the summer, it’s now challenged to prove it’s worth that much, and if its founders don’t wisely distribute that investment, it has as much of a chance at failure as any other startup.

Seek what you need, use it wisely, continue demonstrating your worth and you’ll be able to secure the money you need to become profitable.

2. Let investors in on your financial plans

Many entrepreneurs seek out investors to kick start their companies. The most important thing to an investor is understanding how they’ll see a return on their investment. In these meetings it’s critical to share your financial predictions and strategies so they have a clear understanding of how you plan to enter and grow in your desired market.

You can use a number of online tools to assist with estimating the worth of your company and how much funding is needed for its ongoing success. Remember, investors hear pitches like yours for a living, and financial savvy is a big indicator you and your team are prepared to overcome typical startup hurdles. If you can do that, they’ll be more likely to open their wallets.

3. Learn from other successful companies

Fortunately, for beginning entrepreneurs, other companies have done what they’re setting out to do and have done it successfully. If you look closely at the origins of companies like Facebook or AirBnB, you’ll see they started out modestly and smartly when it came to finances.

Facebook began with half a million dollars in angel investment and went on to IPO with a valuation of $104 billion. AirBnB used its $20K from startup accelerator Y Combinator to turn itself into a company now valued at around $2.5 billion.

With a little research, it’s easy to follow the trajectories of these companies and see how finances played into their ability to allocate funds to embed themselves into the marketplace. There’s much to be learned from the history of the companies able to make their great ideas into reality.

Many factors can affect the overall success of a startup, but financials are the most critical. Even the best ideas can’t be sustained without the financial savvy to know where to seek funds, how to allocate them and make accurate predictions that’ll guide your company to long-term success.

Curious about how much your venture could be worth? Or looking for a world-class teaching tool? Or are you trying to do due diligence on potential deals? Then try a subscription to Worthworm, and let us help you.