Planning is always key and this has never been more true than when it comes to dealing with your money! As a small business owner, the influx and outflux of capital is probably always on your mind. And so, when you receive a big influx of cash from a loan or an investment, how can you make sure that you prioritize the spending of this funding in the best way possible for your business? We’ve put together our top four tips for prioritizing funding to make sure your business is headed in the right direction.
How to Prioritize an Influx of Cash or Funding: Our 4 Tips:
Tip 1: Build a Financial Model That Aligns With Your Business Plan
A financial model allows you to think ahead when it comes to your finances and allows you to be better prepared with your money. Think of it as your financial roadmap that helps you to determine key aspects to the financial health of your business, such as your financial runway and what areas in the business need further investment. Plus, it will allow you to play around with different scenarios to evaluate whether investments should be made in certain parts of the business or not.
Having your financial model and business plan match up will mean that any financial decisions will be guided based on your own data and projections. Your business will have unique needs and requirements, which is why a business plan is so essential. And these unique aspects must be reflected in your financial model to map out exactly what money will be spent where in order to follow your business plan and meet your goals.
Both your financial model and your business plan are hugely important when looking at what the funding priorities are in your business. You’ll quickly be able to identify what gaps exist in the business and if/how these can be rectified with the funding you currently have.
Tip 2: Bring in New Talent
Most businesses will start off with a small team of essential staff to cover the core functions of the business. And this, of course, makes complete financial sense as a startup! It’s expensive to onboard employees. However, with an increase in capital, it may be time, as part of your funding priorities, to bring on new staff members to the business.
Bringing new talent into your business will open up many opportunities that may not have been available to you before with a smaller team. These are people that can fill crucial gaps in knowledge and skills that can help your business achieve real growth. This could be through onboarding a new employee with a specialized skillset, for example marketing, that didn’t exist in the business before as it wasn’t considered a core priority. But now, with more funding available to you, you can expand and grow both your team and the business.
Tip 3: Innovation and Differentiation
You don’t need us to tell you that the market for new and growing businesses is very competitive, which is why it’s essential your business invests in its unique aspects to stand out from the crowd. As well as being different, innovation is also essential, especially if your business sits in a highly competitive market. Customers are always looking for the next new thing! Even if your business does have unique aspects, it’s not always enough on its own, and a lack of innovation may mean losing out to your competition.
And so, investing in innovative products, services, or practices is a worthwhile funding priority that will allow you to always stay one step ahead of your competition. For example, this could be finding new ways to enhance existing products/services or researching and developing new products/services.
Tip 4: Embrace Technology
One of the key areas to think about when it comes to your funding priorities is your technology needs. At the beginning of your startup journey, it was probably enough to simply invest in only the essential technology, i.e. devices for employees. But in an increasingly digital world, businesses looking to achieve high growth will need to really push their business and its operations into using a range of technologies.
Investing in your technological infrastructure will go a long way. This could be putting money behind automating many of the administrative processes in your business, for example payroll and some HR services, or it could be investing in the technological and digital side of your marketing and sales operations. Technology not only improves efficiency in your business, but it will also form an integral part in the expansion of your business.
What Are Your Funding Priorities?
Figuring out your funding priorities can be a tricky prospect if your finances aren’t in order, but that’s where Simple Startup can help. We look at all of your metrics as part of our accounting and fractional finance support services and then customize them specifically for your business. We can get your finances in order so that you can focus on running and growing your business! If you’re struggling with your numbers, why not grab some time on our calendar and see how we can help.