Financial Realities for Tech Start-ups: What You Need To Consider


Whether you have stumbled upon a once-in-a-lifetime idea or allowed it to develop gradually, launching a tech start-up is no easy task. Unlike the old days, you can’t just pop up a website on the fly, point some ads to it, and build a Tier 1 company. That said, it is entirely possible when using the right mixture of know-how and financing.

In this article we’ll assume you have a great idea and are now focused on acquiring your initial funding to launch your product or service. Unfortunately, we do not (yet) live in a world where money trees can be found far and wide (or anywhere for that matter), but there are still a number of possibilities when it comes to financing a start-up.

As Tim O’Reilly, CEO of O’Reilly Media puts it: “Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations.” So while we understand that money may not be the core offering of our business, we of course must acknowledge that business success cannot be achieved without it.

So how much can you afford to lose?

First off, it’s vital to remember that owning a business is very much like a roller coaster. There will, without a doubt, be ups and downs, highs and lows. Some people are willing to gamble everything they’ve got to get their start-up going. They are so committed to their concept and vision that nothing else matters. One could argue that they are reckless, but that isn’t to say that their dreams don’t become a reality. Just remember what’s on the line, and set yourself a limit just so that you have that needed safety net.

How long can you last?

Very few tech start-ups rake in cash or acquire funding from the get-go. This means that together with the above, you’re going to need some form of income, or a nest egg, to keep you going until you generate some form of income. Essentially, you will need to consider the likely loss of income.

Set realistic expectations in terms of how long it may take before you can generate an income again, keeping in mind that it always takes longer than you think it will. Do a personal financial review and create a budget. Without your salary, you may need to do some belt-tightening.

This may go without saying when it comes to employees, but they too will need to be aware of the risks; job security, income and benefits, financial upset.

Remember – if you are creating a business, you have to make money! You need money to keep your business moving forward, but as an individual, you need it to survive.

Enjoy a free lunch

In today’s world you have to give a lot. Whether it is free information or samples of your product, you have to do something to build trust with your customers. If they don’t trust you, they won’t spend money with you. Get used to this idea – it’s not all bad in the long run!

One thing is for sure…

Never forget the all-important bookkeeping; pay attention to what you owe, and make it a point to pay your taxes regularly. The last thing you want is for the taxman to come knocking for your hard-earned pounds. This is where an accountant is virtually indispensable in this day and age, the great thing is that online accountants in the UK are offering a variety of packages which means it’s affordable at virtually every stage of business development.

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