Most common mistakes in the financial management of a startup
We advise many startups and small businesses. Entrepreneurs from almost all segments are looking for us, such as: health, fintech, education, applications, to list a few, and their doubts about financial management in startup are similar, in which we can identify their initial mistakes as well.
Most entrepreneurs when they start their companies do it for reasons of market knowledge mixed with incredible enthusiasm about the possibility of entrepreneurship. The willingness to start the operation and the belief in their knowledge mean that basic precautions are not taken, such as making a good cash flow projection or analyzing the competition, with its prices and product and service differentials.
When the startup starts its operation, marketing mistakes, with a wrong focus on target audience or media vehicle that will receive the investment, are common. We see that high investments in marketing when the company is not prepared to deliver a large quantity of its products or services also tend to drain financial resources and tarnish the company's brand.
Another important point is the control of cash in the initial period of the company. Often, startups spend long periods of time establishing themselves in the market and having enough revenue to generate positive results. Thus, high expenses that will not bring profitability or many investments in non-operating assets are mistakes that can cost the company to continue for years.
Team sizing and motivation will define how the startup will develop. Small teams, even if motivated, may not deliver what is necessary to turn the idea into a profitable operation. Large teams, with idleness, will cause demotivation and high costs, reducing the potential to generate future results. Setting goals by department and adequate number of employees are important to increase the chances of success.
Thus, as important points for entrepreneurs who seek us for advice, be it business plan, business consultancy, or fundraising with funds, we have:
Develop a complete business plan - invest time in market analysis, competition, pricing, your differentials and make a robust financial model of your operation. With these tools, the chances of errors will be reduced and your challenges will be clearer to face.
Focus on profitable marketing - define your target audience and your production capacity in the business plan. See how much each exposure, be it brand or products through marketing campaigns, will return and how the company is developing in each situation. Check investment and return levels continuously so that there is no waste of resources due to overexposure of your brand.
Control cash - in startups, as in any company, the company's cash is used for many expenses and investments. Cash control, with long payment periods and maintenance of a lean and necessary structure, is important to avoid exposing the company to debt or even interrupting its activities. We have already seen incredible startup projects being aborted due to lack of cash after months of operation.
Continuous team follow-up - keeping the team motivated and with the right size in all departments, from sales to administrative, is essential for controlling company costs. In addition, smaller than ideal teams will not deliver on time or with the required quality, as well as large teams will consume more resources than necessary and will not be as motivated.
Clear goals and objectives in stages - everyone in the company should have clear goals, especially in startups, where deadlines and resources are scarce and tasks and challenges are abundant.
We see that the entrepreneurs with the greatest chance of success are those who have invested the most time in preparing the company and knowledge of its market. Operational and financial management errors can be avoided with the points described above, increasing the chances of the startup becoming the company that its founders dream of.
Economista, formado pela Universidade Federal do Rio de Janeiro e Mestre em Economia pelo IBMEC Rio de Janeiro. Eduardo é sócio-executivo da GlobalTrevo Consulting, responsável pela área comercial e pela execução de projetos. É responsável, também, pelo atendimento às filiais do Rio de Janeiro e de Belo Horizonte.
Foi responsável pela fundação da GlobalTrevo Consulting em 2008, definindo seu foco no mercado de finanças corporativas e de estratégia: avaliação de empresas, business plan, pesquisa de mercado, reestruturação empresarial, captação de recursos em bancos de fomento e M&A.
Antes de fundar a GlobalTrevo Consulting, trabalhou no grupo de Relações com Investidores da Medial Saúde, na área de desenvolvimento de novos negócios do Grupo Abril e da Globex S.A. (Ponto Frio) e, antes, como auditor na PricewaterhouseCoopers. Durante este período, desenvolveu larga experiência em elaboração de planos de negócios, avaliação de empresas e em negociações de fusões e aquisições.