You’re probably overly excited about your newly secured funding, and rightfully so. It’s likely a business-changing amount of money and you have so many great ideas for spending it.
However, you’re also wondering what you need to do next to get the ball rolling with your business in regards to funding.
With so many places to start, you need to do a few things to make sure you get the most out of your money.
Calculate your burn rate
Start with the burn rate of your business. Burn rate is found in two ways:
- Gross burn rate: total cash spent each month
- Net burn rate: the difference between cash in and cash out
With your new influx of money, you need to understand how far that incoming cash will go to cover your expenses.
A burn rate is coupled with your runway, or the amount of time it will take your business to spend the cash you have on hand.
The ideal situation is to manage your burn rate moderately while improving runway over the long term. This typically leads to a consistent cash flow that reduces financial risk.
As a result, your business looks better on paper and performs better behind the scenes. You will see greater gains over time in terms of production and expansion, and your business will profit in ways you never imagined possible.
However, a high burn rate matched with a limited runway is going to cause most businesses financial distress. In addition, not having a serious or consistent cash influx will create financial discord. If you run out of runway, you need to have a plan for securing more funding. This is where it pays to create a budget.
Create a budget
A budget is a strategic plan that identifies spending and income sources on a timeline. Because you’ve secured a good chunk of change, it’s easy to be tempted to start spending right away. However, budgeting will ensure your spending doesn’t get out of control.
With a budget, you’ll be able to create a detailed spending plan to properly allocate your funds.
Once you’ve created a budget for the money you currently have, you should start looking towards the future, or post-runway.
A post-runway budget will help you figure out:
- If you will need to secure more funding
- When you will need to secure more funding
- How much funding you’ll need to become fully sustainable/profitable
- How many rounds of funding you’ll need
As you create your budget and look towards the future, you’ll want to keep your investors in mind.
Keep your investors in mind
Keeping your investors in mind helps you determine how you will spend your money and prepares you for the future. Your investors care about your startup and want to see it succeed, that’s why they are giving their support, so remember to keep their recommendations in mind.
Appeasing them now will improve your relationship and heighten the possibility of receiving additional funding from them in the future. Your investors are your biggest supporters, so you should rely on them and their opinions as much as possible.
Start making hires
If you are a startup and you have not yet hired an employee, now is the ideal time to identify the perfect candidate and dream team for your business.
Consider what kind of applicable assets individuals should have to offer to your company when they apply. Categorize the types of skills that you need from workers in order to achieve tasks, and list them in order of importance for your company. This will create a guide to follow when making hires.
However, it’s important to remember this is a working list that will change as your company culture evolves with new projects, clients, and employees.
If you already have employees, invest in them and make sure any new hires will fit within your existing team. You’ll also want to ensure new hires fall in line with your corporate vision and values. This helps build a positive and healthy company culture.
Work with a trusted accounting partner
Your accounting partner provides strategic advice specific to your business. This is intended to help your company grow financially over the long term. Along with having an accounting firm that manages all of your financial assets and expenditures, you also gain the financial expertise of that business.
Expand your company with perks and benefits available through your accountant. Watch gains you never thought were available, come to fruition thanks to the outsourcing of this area.
Ultimately, you stand to determine the best practices for your company, which will help you to be financially stable and capable of expanding with future capital and more funding opportunities.
Consider a CPA or a fractional CFO, like Pasquesi Partners. With our experience, we will work to meet your startup’s needs and move you towards greater gains from your funding.