How Small Companies Can Avoid Collapsing at Inception Stage

There are very many startup companies that start their operations every year, but research shows that very few of these businesses reach their fifth year of operations. Most of them fail to succeed and fall between their second and third year. However, few companies overcome startup challenges and grow to become larger business organizations and sometimes international companies. Here are some factors that startups should consider to avoid collapsing.

1. Initial Capital

Most of the startup companies fail because they do not have sufficient capital to sustain business operations before it can start generating its funds. Most of the entrepreneurs have just enough capital to start a business but not to sustain it for at least six months or one year. Entrepreneurs need to have the necessary funds to sustain a business after its inception. It is evident that the company cannot be able to handle its financial needs because it has not started to make substantial revenues.

2. Social Media Marketing

If you are contemplating on how to start an online store, you need to think of social media marketing as well. Without social media marketing, you will be engaging in futile business activities that will not generate sufficient funds to sustain your business. There more than 2 billion Facebook users, which means that you cannot ignore social platforms. Startups need to take advantage of the large number of social media platforms to market their products and services.

3. Experienced Employees

Startup companies tend to hire talented employees with the hope that such employees will grow to become reliable members of the company. That is an outstanding employment program but is not necessary for startup companies. Small businesses need experienced employees who will be able to handle the business in its most delicate state and establish the company. Therefore, before starting a business, hire skilled workers who will handle sensitive duties.

4. Incorporating Technology

The success of any small company depends on its ability to integrate modern technology in various operations. Small companies need to be efficient and effective in their operations. They need to use minimum resources and produce maximum output. Technology has, for a longer period, been known as one of the best ways of minimizing the cost of operations. Startup companies will be able to meet the needs of their customers efficiently if they have incorporated technology in their services.

5. Business Outsourcing

A startup company does not have sufficient funds for full-time employee employees. Some duties can be handled by an outsourced company. For example, accounting and human resource services should be handled by an outsourced company, which will significantly lower the costs of operations. The company has not expanded enough to accommodate a full-time human resource manager and an auditor.

Avoiding Major Investments

One of the most common mistakes that startup companies make is engaging in significant investments a few months after starting their operations. Companies start buying large plant and equipment with the cash that is being generated. This is a huge mistake because it minimizes the cash-flow in the company. It eliminates liquidity that is essential to the growth of a small business.

These are some of the few tips that you need to incorporate if you want your startup company to succeed. Many companies fail at inception stage because they act big and fail to follow some simple operational procedures which lead them into financial distress.

Brett is a 43 year old father of 2 boys. Has a degree in Business Management and enjoys learning about emerging business trends. In his free time he writes about his experience with business and emerging trends.