Must be the money

4 financial concerns to keep in mind when launching a startup

Every penny counts when you're starting a company. Getty Images

You have been working on a new creative technology idea for months, an idea that will solve a problem or make a current process even better. Your innovative idea is ready for the next step, and you, in turn, are prepared to begin your tech startup. Building a company can be stressful and exhausting, but also exhilarating and rewarding. As you begin your product launch, keep these financial tips in mind when starting out.

Consider your funding
Determine how much funding you can use from your personal accounts to jumpstart your business. By investing some of your own money into your company, you show good faith in your business plan and product. This method is appealing to investors because it shows you have a long-term commitment to the company. Next, determine how much you will need from other sources and what those other sources should be. Potential options of funding in addition to traditional bank loans are venture capitalists, angel investors, government grants, and support from business incubators.

Determine your budget
An essential step of starting up is concluding how much funding you need to get started. Establishing a realistic budget is crucial. It can make the difference between having a successful business or joining the 50 percent of small businesses that fail in the first four years. The hiring of employees, leasing office space or lab space, purchasing office equipment, paying for insurance (health and liability) and providing yourself a salary are all items that need to be included in your budget.

Unanticipated extra costs occur from time to time, so overestimate your expenses. Underestimating expenses can sink your startup. Ensure your business is solvent by preparing your budget for more. Additionally, keep in mind different types of expenses, and budget accordingly. For example, you may have one-time costs and on-going costs or fixed costs and variable costs.

Cash flow
According to a U.S. Bank Study, 82 percent of businesses that fail do so because of cash flow problems. Managing your cash flow is crucial to success. Without positive cash flow, you are not able to pay your employees, rent, or taxes. Having profits does not necessarily mean you have positive cash flow. Keep ongoing cash flow work sheets to ensure you have the cash you need to continue on a successful path.

Managing for life
As mentioned earlier, make sure you pay yourself something. It does not have to be a big salary in the beginning, but you need to eat. Additionally, you need to save for emergencies. An old rule of thumb states that an emergency fund should consist of three to six months' worth of expenses. As a result, an emergency fund can make the months where business is slow, or between projects, more sustainable.

Meanwhile, it is a good idea to separate your personal and business banking accounts. Doing so will allow you to stay more organized and help tracking and managing expenses easier. Additionally, separate accounts may be beneficial when paying taxes. Consult a tax professional for additional guidance on taxes. Finally, do not forget to save for your retirement. While it is important to focus on your new business, do not neglect to take care of your personal financial health.

With proper planning and continued financial monitoring, starting your own tech business can be done well and bring years of career satisfaction.

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Joseph Radzwill is senior vice president and a financial adviser with the wealth management division of Morgan Stanley in Houston.

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Building Houston

 
 

Re:3D is one of two Houston companies to be recognized by the SBA's technology awards. Photo courtesy of re:3D

A couple of Houston startups have something to celebrate. The United States Small Business Administration announced the winners of its Tibbetts Award, which honors small businesses that are at the forefront of technology, and two Houston startups have made the list.

Re:3D, a sustainable 3D printer company, and Raptamer Discovery Group, a biotech company that's focused on therapeutic solutions, were Houston's two representatives in the Tibbetts Award, named after Roland Tibbetts, the founder of the SBIR Program.

"I am incredibly proud that Houston's technology ecosystem cultivates innovative businesses such as re:3D and Raptamer. It is with great honor and privilege that we recognize their accomplishments, and continue to support their efforts," says Tim Jeffcoat, district director of the SBA Houston District Office, in a press release.

Re:3D, which was founded in 2013 by NASA contractors Samantha Snabes and Matthew Fiedler to tackle to challenge of larger scale 3D printing, is no stranger to awards. The company's printer, the GigaBot 3D, recently was recognized as the Company of the Year for 2020 by the Consumer Technology Association. Re:3D also recently completed The Ion Smart and Resilient Cities Accelerator this year, which has really set the 20-person team with offices in Clear Lake and Puerto Rico up for new opportunities in sustainability.

"We're keen to start to explore strategic pilots and partnerships with groups thinking about close-loop economies and sustainable manufacturing," Snabes recently told InnovationMap on the Houston Innovators Podcast.

Raptamer's unique technology is making moves in the biotech industry. The company has created a process that makes high-quality DNA Molecules, called Raptamers™, that can target small molecules, proteins, and whole cells to be used as therapeutic, diagnostic, or research agents. Raptamer is in the portfolio of Houston-based Fannin Innovation Studio, which also won a Tibbetts Award that Fannin Innovation Studio in 2016.

"We are excited by the research and clinical utility of the Raptamer technology, and its broad application across therapeutics and diagnostics including biomarker discovery in several diseases, for which we currently have an SBIR grant," says Dr. Atul Varadhachary, managing partner at Fannin Innovation Studio.

This year, 38 companies were honored online with Tibbetts Awards. Since its inception in 1982, the awards have recognized over 170,000 honorees, according to the release, with over $50 billion in funding to small businesses through the 11 participating federal agencies.

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