3 Start-up Funding Mistakes To Avoid

Author:
Athar Ahmad
|
Publish Date:
October 21, 2020

Disclaimer: This Article is updated by Yusra Qasim.

 

Start-ups are the fuel that drives us entrepreneurs each day. The excitement that comes with each decision is what keeps us going, even the scary ones. But one mistake is usually all it takes for a dream to end.

But don’t worry, from our research we have categorized 3 major mistakes that start-ups make without even realizing it and we have listed them down below to help you in your journey!

Mistake 1: Not having a clear financial objective

So, when one is coming with an idea on what they need to start a business, we usually come up with a ballpark figure. “Oh give me 20K ill make a better business than him!”, is usually how the boastful conversation goes between friends. But if you are really going to start your business and someone asks what kind of investment you need…DON’T give a ballpark figure.

For 2 reasons; ONE, they might have the capital you need to start a business but since you weren’t able to justify the figure you quoted, they ignored you. TWO, when coming up with the figure you might have ignored some key overhead figures. Like rent or electricity bill for ATLEAST the next 6 months. It’s better to sit down and plan out your cost, give yourself a 10& margin on top of it, then quote an amount. It’s just a safer bet.

 

 


Majority of start-ups run out of cash! Don’t be like them


 

 

Mistake 2: Taking out an inflexible business loan

Now, I am not experienced with the bank lingo but I can tell you for sure, do NOT take out a loan with the following:

  • High interest rate
  • Fluctuating interest rate
  • Early settlement fees

The high interest rate for a start-up is like suicide. In the first couple of months a business is getting settled on its feet. Which means more money is going out of your hands than coming in. the best option is to try and keep the payments as low as possible (but not compromise on quality). But while trying to get the low interest rate, be vary of the fluctuating interest rates. They are usually low in the beginning but take a drastic leap in subsequent years. They are more likely to drain a business even if it has achieved break-even. Don’t make these mistakes.

 

 


Launching a start-up- advice from a failed entrepreneur


Mistake 3: Not having a Chartered Accountant

Accountants are worth their weight in gold – or tax, specifically, what they save you in tax.

Now not all are born with the math skills required to manage the books. And even with having an A in math from the bet degree out there, chances are taxes are just not your cup of tea. While learning accounts in university this was a bitter pill to swallow. So, even if you can’t hire a full time accountant, it would be a safer bet to get someone part time who can handle your books and keep you in the clear.

Conclusion

Needless to say, there are many mistakes we consciously and/or unconsciously make but these 3 top mistakes are something we all should avoid.

 


Mentoring tip by mentors at Pakistan start-up cup 2018-2019


 

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