It is really important, with accounting for startups, to develop your business model right away. I don’t mean the operations, of the business. I mean the financial business model. What will it cost you to live for the initial startup period, when you have no revenues?
Once you have funding, whatever the source, how long will it last?
You must have a strategy around how you will manage the spending of any funding for your startup.
In my previous post, simply titled, “Accounting for Startups” I gave you the very rough beginnings of a template, for how to start looking at what your one time, monthly, and annual expenses might be.
Now it’s time to take what you’ve started with, and add it to a timeline. Don’t worry if you haven’t gotten everything into the initial list yet. It’s easy to add things in, as you go.
Watch the video, and see how this comes together. By the end, you will start to see, how you can get a very clear picture of what it will cost to run your startup, for whatever time, you expect it to take, to bring your app, or product to market.
When this second phase is complete, you’ll be able to see what your burn rate is, and cumulatively, how much capital you’ll need to bring your product to market.
You will also be able to make quick adjustments, if needed to see where you may need to cut back, if you find yourself in a place where you really need to bootstrap your startup.
The beauty of what I am showing you here, is that it doesn’t cost you a thing. Microsoft Excel costs money. Google Sheets can be accessed for free, and it does the job really well.
Now let’s take a look at how we can expand on the business model. This is where it starts to get powerful, because without a lot of effort we can be as specific as we want to be about projecting the itemized costs within a cost center, and the timing of when it will impact our cash flow.