On average there are 10% more new startups each year than the year before but 2015 is set to far outstrip that, possibly by 25% as much again. The future’s bright!
But how do you ensure your startup is one of the successful ones? Here are our top 14 tips to help you succeed:
1. Plan for the future
Future growth plans and strategies need to be based on accurate forecasts to ensure you are building on solid foundations. Exploring different scenarios can help you make better decisions about the future and avoid costly mistakes which many startups struggle to recover from.
2. Manage your cash flow
Cash flow is the linchpin of success for any startup or micro-business, mainly because they is rarely enough cash to keep the business afloat in the early days before the sales become predictable and reliable.
Being able to manage your cash flow from your operations is a vital key to success at every stage of your businesses growth, and absolutely vital for a new business.
3. Forecast regularly
Cash flow forecasting can help you anticipate the future, foresee potential problems and allow you to play with different scenarios without the risk.
Some accounting software can do elements of forecasting but a specific independent forecasting tool is recommended to get an accurate and trusted view of the future.
4. Know who your customers are
Success depends on your ability to make sales. By understanding who your customers are and exactly what their needs are, you stand a much, much better chance of being successful.
5. Know how many leads you can realistically generate
This can often be a difficult thing to judge but if you have done your market research thoroughly you will know what is a realistic number of leads to expect. This number will (hopefully) grow with time and this growth should also be something you have a realistic expectation of. Factor this into your forecasts - expect to see few sales to begin with and gradually build up. You must be able to fund the business during this period!
6. Understand your conversion rate
Your conversion rate is the percentage of leads which turn into paying customers. Logic dictates that a higher conversion rate will lead to bigger profits but this doesn’t have to be the case.
If you are able to generate a low number of leads but your margin is very high, a low conversion rate could still be profitable.
7. Be realistic about the number of sales you are likely to make
Knowing how many customers you are going to have on a monthly basis can be a difficult thing to predict but if you know how many your need to break even you can make some important decisions about the rest of your business to ensure it is as profitable as possible from the start.
The number of customers will also depend on things like; quality of leads, ability to increase your conversion rate and external factors such as the economy.
Whilst you can’t control all of the elements that impact your sales, you should be aware of the things you can control and manage and review them carefully.
8. Set a competitive price
The key to any successful startup is understanding the market they are entering. Understanding the price your market will pay for your product is essential if you're going to gain ground. Don't simply undercut your competitors - this strategy requires a lot of funding and sends a clear message that your product or service simply isn't as good as your competitors'.
Basic market research of your competitors and competitive products can lead to success for your startup business, not only informing your pricing but also your approach to marketing and your differentiators.
9. Know your margin
Margin and profit are not the same! This is a common mistake made by many startups and can be the biggest hurdle to success. Margin is one of many tools which can be changed to lead to a bigger profit being made by the company as a whole.
Your margin is the difference between how much it costs to produce or provide a product or service and the amount you actually sell it for. And those aren't just the obvious costs - you need to factor-in everything like your insurances, premises and mileage. Fortunately there are tools that take away all the calculations and make that really easy!
10. Budget for marketing
Including marketing spend in your initial business plan is essential but it can't stop there. Too many startups die because they cut corners and don't actually spend that money on marketing! This can be for a number of reasons, but the truth is you put it in your budget for a reason!
Marketing your startup will allow you to grow your business, keep your budget on track and help you meet your sales targets – all crucial to success.
11. Understand your pipeline
Another important factor in the success of any startup, or any business, is the understanding of where customers come from and what their customer journey looks like.
Talk to your customers and understand how they made their decision to use you instead of your competitors. This data will be crucial as you come to implement growth plans.
12. Build a customer-focused culture
Creating a culture orientated around customer service can strengthen relationships with your customers, increase their loyalty and turn them into advocates of your business.
Word of mouth is a very powerful form of marketing, and a repeat-purchase from a happy customer is much cheaper than finding and wooing a new one!
13. Be mindful of potential funding options
There are a number of different government and bank-backed funding schemes which are specifically designed to boost the success of startups.
To increase your chances of a successful bid for funding, you will need to produce professional financial forecasts to demonstrate you are fiscally responsible. Finanscapes forecasting tool allows you to publish unlimited plans to aid your funding applications.
14. Success is a state of mind
In order to succeed, we must first believe that we can
- Nikos Kazantzakis
For more information about the importance of cash flow forecasting and understanding the financial elements of a successful startup, check out our blog or follow us on social media.