10 financial tips for tech startups
Starting a startup is difficult in any climate, but after the pandemic there are some very real challenges to consider. However, there are some universal financial truths about starting a new business and others that are unique to the tech startup world.
If starting your own tech business has long been a dream in your mind, maybe now is the time to grab the nettle and make that dream come true. In an age when there are more entrepreneurs than ever before, expert advice is everywhere. We’ve narrowed down the top financial points you need to consider when launching your tech startup.
Write a financial plan but keep an open mind
Traditionally, all startups need a fundraising plan. Although the format it takes has changed over the decades, the premise is still the same. Although the reasons for creating one have evolved. These days, it’s not the bank manager you’re trying to impress, but maybe your investors. Your business may be entirely self-funded, but even so, recording your ideas and plans on paper is the perfect way to focus the mind and set the course.
You don’t need to create tons of documentation, better to create a set of slides to outline your plans and development. Limit yourself to ten slides and tell your story as you see it.
And while this shot is a great place to start, like all good stories, there are bound to be twists, twists and turns, along the way. Be prepared to tailor your story to these unpredictable events, keeping your goals in focus.
Continue to verify your product audience
How do you know what your customers need? You ask them. The only way to create a product that makes you money is to create a product that meets a specific need. This specificity is defined by your customer, not you. You’ll only find out in your direct mailings, customer surveys, and social media efforts.
Listen carefully and listen regularly. Use this information to design the perfect product that you can adapt as your business and audience grows.
As a tech startup, you’ll need to stay tuned and make sure you’re delivering the most up-to-date, solution-oriented product. You will get all of this information and more by listening to your customers.
Make sure your distribution is scalable and affordable
Or to put it another way, make sure you can keep your promises. As your business grows, which it most likely will, have the funding in place to distribute on an increasing scale. Whether that means taking more resources in the form of staff or software, have those financial plans in place before they become a problem, not after.
Go so far as to incorporate them into your financial plan before you even get started. One less thing to consider when you’re ready to grow taller.
Create a culture based on your financial priorities
If you are considering building a team, part of this process is building a healthy culture in your business. Tech startups in particular can mean staff members work in isolation or in silos, but this can be addressed with a healthy culture of accountability and accountability.
If staying on top of billing is important to your business, create a culture of reward. Explain to staff what is important to the business and celebrate successes together. Learning how to be a good leader is a new and often difficult dynamic in building a startup that founders often neglect to consider. In addition to designing, building, and selling a product or service, you need to inspire others to understand your vision.
“Vision is the ability to talk about the future with such clarity, it’s like talking about the past.” ~ Simon Sinek
Your team is the backbone of your organization and the secret weapon to your financial success.
Right to hire
Continuing from the last point, to create financial growth, you will need to hire the right people. Be very clear in your mind what you are looking for and what qualities your recruits will need to bring to the table.
In an age where many people have retrained and improved their skills, don’t rule out those who don’t come from traditional tech backgrounds. The determination and innovation they have shown to retrain themselves might be just what you are looking for.
Consider soft skills such as communication, empathy, determination and collaboration as well as the technical skills needed for the job. Someone who shares your vision, works well on the team, and shows the opportunity to learn additional skills is a huge asset both personally and financially.
You are a salesperson, not just a founder
You may not know it but you are. You sell your business to everyone you talk to and everyone you employ. If you can’t describe what you do or why someone should buy your product or service, then how can another member of your team do it?
If you’re struggling to find clear, concise wording, now is the time to develop your pitch. This 30 second speech where you briefly explain who you are and what you do. Train and test it and you will become the best seller for your own business.
Develop financial systems as you grow
The accounting software you used in the beginning may have captured the right data to begin with, but as your business grows so should your accounting systems. This usually involves a financial investment and this is an area where startup founders often need to take a deep breath.
In order to keep customers as loyal investors in your business, you need to provide them with the best possible experience. This is what will help you stand out from the competition.
To do this, your systems must match your promises. And in addition to the physical software, your processes can also be examined under a microscope for change. The ‘we’ve always done it this way’ mentality isn’t a useful place to start, so take a look at pipelines and the customer journey regularly. Position yourself as a customer and honestly think about how it felt to purchase your product or service.
Try to maintain a work / life balance (your financial success depends on it)
As the founder, you will find yourself drawn in several directions at the same time. Product tests, technical side, marketing, accounting and recruitment. It’s a lot. You could very easily be working or thinking about working 24/7. But whether this is a productive use of your time is another question.
To be at your best, you need a certain degree of self-care. It might not be something you’ve thought about a lot in the past, but you’ll quickly learn it when you feel the stress of running a startup that starts to tire you out.
You might not get all the rest and relaxation you ideally want, but taking time for a bit now and winning is imperative. A walk, a morning off, an early arrival – all of these things will help you stay focused on your finances, but also give you some much-needed headspace to consider the other things you have on the go.
Again, this may not sound like something you do, but in order to push your business toward financial growth, networking can be a great learning and selling platform.
Taking the time to talk to other tech founders will give you a really good idea of who your competition is and some of the common challenges you face. It will also give you the opportunity to present your technology solutions to other companies and consider their arguments as potential solutions for your business.
At the very least, you should participate in some interesting conversations and see who else is in your industry.
Reframe financial failure
At every stage of the journey of starting a new business, there is the possibility of failure. It may not be a catastrophic failure but a series of setbacks. The big point is failure though, it has the power to divert you from the course unless you learn to approach and handle it differently.
In the past, you may have viewed financial failure as a natural stopping point, a warning that your ideas are unsustainable. But if you’ve had the courage to start your own business and are confident you’ve found a product or service that you really need, quitting isn’t an option.
Instead, rephrase your thoughts on the failure. Look at each setback as one more step on the road to success. Opportunities to learn and refine your offer. Not easy to do but essential given the likelihood of failure at some point in your trip.
Starting a tech startup is a courageous step, it requires resilience, courage and a willingness to learn. It may also be the most financially rewarding thing you have ever done. Turning your own skills into a business that adds real benefit to a customer can be extremely satisfying.
Follow these financial tips and start putting your dreams down on paper, ready to turn them into reality.