Cash Management or Lack of profit? Only 2 out of 10 start-ups survive their first 18 months

Nine out of 10 startups fail, which is why the failure post-mortem has become so common that it’s practically a Silicon Valley cliché.

– Fortune.com

We can’t simply expect a business to hit the top charts in its first 6 months. In this competitive era, companies take months or even years to reach the top. Unfortunately, even after struggling for so long, some businesses may never reach there. According to a research by moyak.com, 5 Million startups are born every year but 90% of them never unlock the door to success. But why do startups fail? Why can’t every startup be on that elite 10% list?

Here’s the list of 10 possible reasons why:

No market requirement: 42 percent
Cash Management issues: 29 percent
Not the right team: 23 percent
Too much competition: 19 percent
Pricing / Cost issues: 18 percent
User un-friendly product: 17 percent
Product without a business model: 17 percent
Inadequate marketing: 14 percent
Ignore customers: 14 percent
Product mistimed: 13 percent

It is tough to leave the comfort of a salaried job and start something new. Only a handful of brave hearts can take this decision. But when you make this decision, you enter the pool of competition. With a fantastic product, you’ll need the capacity to stay on the course for a long time to build a brand out of it. This surely can take time; it can take months, maybe years. Correct decisions will help you survive and stay in the game. With proper decision making, you can reach the point where other 9 startups that began their journey with you couldn’t.

It is easy to say that we were not generating much profit; thus, we had to close. But did you know, Apple started in 1976 and weren’t able to get on the map till 1984? Eight years of little or no profit. The company today is valued at $940 Billion. So, it’s not about instant profits that will make your business a success; it’s about the correct decisions and staying on the course.

One of the most important things that people struggle with is Cash Management. People tend to spend all the money they have in their business and wait for the profits to regulate. This is not the correct way. As a startup, you’ll have to save whenever you can, so you stay in business even your profit margin is low.

In this blog, we’ll have a close look at what is Cash Management and how can we reduce our overhead expenses.

Cash Management- Reducing overhead expenses:

“If I had to run a company on three measures, those measures would be customer satisfaction, employee satisfaction, and cash flow.”

Jack Welch

Former General Electric CEO, author, and chemical engineer.

Per Wikipedia: Cash management refers to a broad area of finance involving the collection, handling, and usage of cash. It involves assessing market liquidity, cash flow, and investments.
Overhead expenses are the necessary expenses required to operate a business yet are not directly attributed to generating revenue.

Overhead expenses primarily consist of staffing costs and additional expenses required for building the environment where the staff can operate. The additional expenses may include Infrastructure, Computing and communication systems, Travelling expenses, Food and beverage, additional benefits mandated by the government, etc.

You can reduce some expenses, but you can’t go too hard as these things are vital to run a business. But there is a strategy where you can reduce your expenses without having to worry about it affecting your business. The strategy is Remote Workforce Solutions.

What are Remote Workforce Solutions:

Remote Workforce Solutions is a strategy where a company will hire and manage remote employees as an extension to your in-house team. The company which you have partnered with will be responsible for the overhead expenses.

Your remote workforce solutions partner will provide you with the best in class, handpicked employees at a cheaper cost. That said, with remote employees, your headcount will increase, and you can operate all the non-core functions smoothly. With your partner handling the non-core functions, you can focus on the mission-critical aspects of your business.

How will this help me generate revenue?

Remote Workforce Solutions will help you complete your tasks swiftly, and the customers will receive a faster and better service. This creates a velvet customer experience. A happy customer can be your promoters and they will spread your business through word of mouth. Experts say there is no better form of advertising than a good word of mouth.

But generating revenue is secondary. Remote Workforce Solutions helps you save money so you can regulate your business. You can use remote workforce solutions for Customer Service, Sales Development, Content Management, Back Office, Virtual assistants, etc. Your remote employees will cost you less than 50% compared to the cost of hiring an in-house employee.

If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.

Lee Kuan Yew

Former Prime Minister of Singapore

In conclusion, generating profit is vital, but a more crucial task is to stay in business. When you started a business, you signed up for a marathon and not a sprint. If you save enough money, you will not tire quickly, and that is how 1/10 startups reach their goal.