Top 5 Financial Challenges faced by Startups in India along with the solution to the Startup problems
The most frequent financial challenge faced by early-stage startup will be covered in this blog article, along with advice on how to prevent them. It's imperative that we stress the value of being in complete control of your startup's metrics and keeping a laser-like focus on the medium to long-term goal from the very beginning.
An individual software user or service subscriber is typically referred to as a unit in SaaS contexts like e-commerce and apps. One physical consumer would stand in for a unit if we consider brick-and-mortar (physical) startup in this scenario. Two important considerations are necessary for calculating unit economics:
Answer to these questions are important to ensure that you have a clear understanding of how much money you are actually making from each unit and how much you are actually spending on each customer. A business must be financially sustainable from the start and make money while attracting and expanding its customer base, even though we would all prefer to think about the future and this is actually encouraged.
When evaluating the worth of your units, it's crucial to consider some crucial indicators like LTV (customer lifetime value) and CAC (customer acquisition cost). The computation of LTV depends on the type of business you're growing and includes several variables, such as Customer retention rate or churn rate, Number of purchases per month, and Average cost of each purchase.
Keep in mind that the purchase notion could be replaced in many SaaS setups by a subscription occasion or a new user.
You're much more likely to get a realistic assessment of the company's health and a quantitative overview of how things are operating if you approach your startup with a unit economics perspective from the outset. Keep in mind that your company needs to be profitable.
The COVID-19 epidemic has taught us that anything can happen and that we should always be ready. Emergencies can occur, and we never know with certainty what course our economy, market, or nation will take at any particular time.
An important component of your business strategy should always be your medium- to long-term vision. It can be easy to savor the moment and let the wonderful triumphs and progress consume you. However, it's important to look forward and have money set up for a variety of potential circumstances in addition to concentrating on the present business health.
We should continuously be looking for ways to maximize profitability, customer retention, and savings because it's so simple for money to just run out. By adopting a mindset that is centered on streamlining, we can also increase savings.
Here, it may be problematic to believe that quick expansion is comparable to big hiring. A heavy commitment that might result in issues later on is hiring a larger team before you have a clearer picture of a medium- to long-term set of goals. In order to effectively manage your cash flow, it's also critical to prioritize streamlining and make sure that even the most fundamental operational costs like utilities are optimized.
A steady cashflow is essential. An organization needs cash on hand to cover daily costs and build reserves for the company. It frequently happens that one challenging month can have a significant negative influence on a company's cash flow, which can then set off a domino effect that can endure much longer than planned.
You can try a lot of things to better manage your cash flow and even make sure that it works in your favor. These consist of:
To truly understand the state of your organisation, it is crucial that it is built around accurate reporting and spending tracking. Knowing exactly where your money is going is very important, and reporting helps you do this amidst the turmoil of busy day-to-day operations.
The Jordensky can offer us knowledge in this area. We specialize in offering CFO services to startups and use our breadth of professional experience to improve your financial situation and offer guidance on the best reporting practices.