FINANCIAL MODELLING OF A STARTUP

It is said that 90% of the startups fail and the major reason that has been stated behind this is that none of those failed startups had good financial management. Managing your finances well has always been a very crucial thing to be able to do. A lot of startups do not have any idea what money they want to raise, at what intervals and what they would do with that raised amount of money. Therefore, a proper forecast of funds to be allocated in order to raise them as and when the situation demands comes into the picture. A company needs to have a clear vision as to where they would like to head in future, what revenue they would generate by selling how many units of that material, what would be the costs associated with that revenue after taking into effect both inflation and economies of scale. So much so about the revenues and direct costs. Apart from this, they also need to know the market trends and what their competitors are up to. The market analysis would be required to determine the trends and at what pace the market that the company is associated with, is growing. This would help them ascertain their pricing. Competitor analysis is necessary for them to decide what marketing strategies they should apply in order to overcome competition that is pertaining in the market. All of this requires a thorough understanding of the business. Once you have created a good model about how you would manage the finances, and you are in a position to explain each and every number adequately, then chances are that you can survive or maybe thrive in the business that you are handling.

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