Here is What You Should Not Do as an App Startup Struggling with Funds
As a new business one of your primary problems in life will be to amass enough funds to keep your business’s operative costs in order and to inject the capital it needs to grow. With a mobile app development company that is targeting a current market opportunity, getting funding becomes even more critical and time-sensitive.
You may have started your business with a solid business strategy and you may even have an app investor on board. But why are you still struggling? Chances that you are doing one of the following things.
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You Suck at Accounting
A lot of startups skimp on hiring the right expertise in some strategy that helps them save money. Often it is the owners who shrug and think, “how hard could it be” and fail to put accountants to shame.
The money is the blood flow of your startup, surely it deserves to be tracked and managed by someone who knows what they are doing.
The first thing you must do is create a separate account for your business. This way your personal expenses do not get mixed up with the day to day expenses of the business.
You want to then invest in a competent financial manager. This should be accompanied by establishing a transparent accounting system. This will include everything from creating invoices, sending reminders to debtors, and managing your payroll and paying taxes the right way.
Also make sure that your accountant is entering every income and expense in a software so that it is easier for you to review transactions at the end of every month or year.
You are an Impulse Spender
If you treat the organization every time you achieve a milestone you may be an impulse purchaser of an entrepreneur.
Unplanned purchases feel justified when you feel the app startup is doing well, but they might not be.
All startups have petty cash and miscellaneous sections outlined at the end of budgets. This is meant for just these situations. If you have funds leftover for this section, that is your green light, but if not, you should stick to the budget.
This way you won’t have to even think about whether you should spend or not, and will not have to deal with the guilt of spending too much of your startup’s funds in a very little time.
You Are Underselling your Services
Part of building an app that offers a service to your target audience is that you have to price it right. Your app could have tons of downloads but if you are not making a profit out of the service it is offering it may all just be for nothing.
Sure you want attractive prices to promote the use of your app but its tricky, as there is not much room before people begin to judge the value of your service for the low cost it demands in exchange.
If you did start out with promotional prices and want to transition back into your normal prices a good rule is to follow Weber’s Law according to which, buyers do not notice or are affected by a price change as long as it is under a 10% margin.
Poor Management of Limited Resources
When you do not have a strict budget about everything you are supposed to spend money on you are likely to dip into resources and leave very little money for your next move. It is possible that you are spending more than you should on your working capital that you are depleting funds from long term capital purchases.
A neat way to get around this is to devise a two-tiered strategy for budgeting. One will offer guidelines on expenditure for the year, while the other will dictate expenditure for on a monthly basis. The reason you need this is that your business may not be spending the same every month.
This way you will be able to make calculated decisions about whether you should spend on luxuries and what you should skimp on entirely for the time being.
It is not easy to secure funding for an app idea, therefore it should not be taken for granted. Once you have figured out how to get money for apps, you should be cherishing that capital and diverting it wisely in your app startup.