Starting a business is always the dream of many people. There’s nothing fulfilling than being your own boss. However, the road to entrepreneurship is bumpy and requires a lot of courage and persistence.

There are many businesses that start but never get far. Statistics show that almost 90 percent of businesses never live to see their fifth anniversaries. Launching a startup can be a great idea – nonetheless, you should be aware of the existing competition and be ready for the challenges ahead.

According to Hiruy Amanuel, there are several reasons as to why most startups fail. Some of the reasons include making the wrong investment, failing to use appropriate technologies and tools, and financial mismanagement.

Among the above reasons, financial mismanagement appears to be one of the major reasons why startups fail.

As an entrepreneur, you need to understand how to utilize and account for every penny when getting started with your business.

Below are 6 financial tips for entrepreneurs launching startups from Hiruy Amanuel:

1. Start with a plan

Most businesses run into financial challenges a few months after starting simply because they don’t have a plan. A business plan is a very important tool for every startup. It serves as a roadmap as to where your business intends to reach.

In other words, a business plan is a document detailing your idea and how it should be implemented. It should comprise of things such as the concept of the business, market analysis, financial elements, funding requirements, and financial projections.

2. Cash flow management

Cash flow management is very important for all entrepreneurs launching a startup. It is very easy to run out of funds within a short period of time if you don’t properly manage your cash flow.

That’s why it is important to know where every dollar being generated and where it is being directed.

You need to stay on top of things right from the start. Failing to do so is a recipe for a downfall. It doesn’t matter how brilliant your idea is, when funds run out, everything comes to a standstill. Create a budget and stick to it.

3. Track and monitor expenditure

When starting out, expenditures are generally high. For instance, you will need to buy inventory, pay employees, deal with insurance, licensing among others.

Although hiring an accountant or financial manager would be a good idea, that means an extra expanse. The best option would be to check out for accounting software, to keep organized.

This not only facilitates cash flow management but also make things easy when the time to file taxes approaches. However, you will need to employ a professional as the business expands.

4. Minimize fixed expenses at the start

One of the mistakes most entrepreneurs do is to overspend at the initial stages of a startup. You need to keep your expenses low if you want to get far. For example, you don’t require a big and luxurious office within the city.

Save as much as you can and channel a big chunk of the money for the growth and expansion of the business.

The problem is that most startups prioritize the wrong things. They want a fancy office in town, there meals in a day among other laxities.

5. Concentrate on customer acquisition

Your business won’t go anywhere without customers. The earlier you come up with customer acquisition strategies, the faster your business will grow.

As soon as you figure out various acquisition channels, the next thing is to work on optimization and lowering costs.

It is difficult to test all customer acquisition channels at the beginning. This is because of the cost and time required to do that. The best you can do is to shift focus on the most promising opportunities. If you are able to successfully scale a few, exploring others won’t be hard.

6. Have financial goals

Having financial goals will help bring financial discipline. Instead of saying “I want to build a multi-billion startup company”, break that down into financial goals.

You can come up with daily, weekly, or even monthly financial goals, that will help put you on track and make necessary changes to maintain growth and stability.

Bottom line

Everyone can launch a startup. What sets successful entrepreneurs apart from those who fail is their ability to overcome challenges, through planning and financial management.