Caption: Sustainability and Profitability of a Start-up.
Author: Chia Yan Min
Date: 27 December 2016
This article states a few problems that start-ups typically face. Some of the problems include having a loss in the first 9 months of the business, or even difficulty getting the fund that the business needs. As a start-up to get funding from various investors, venture capitalists or etc., a start-up has to first complete their financial projections, like their sales forecast, sales budget, profit & loss statement, etc. to convince the investors that it would be worth for them to invest in their start-up. Potential investors usually take in consideration about the scalability, sustainability and profitability of a business before they decide to invest in it. If they feel that the business has no potential to do well, they will not invest in it.
Relating it to what we learnt in this semester in this Financial Management module, we were required to show our 3 year financial projections and we had to show our sales forecast, sales budget, purchases budget, expenses, profit & loss statement, and a few others. For our sales forecast, we had to take into account about the business’s start-up and growth period & also seasonality to predict our future sales. This is so that it can clearly be seen by investors deciding whether to invest, that the company is well prepared and organized about their business. That being said, it is perfectly normal for a start-up to not make any profit in their early stages of the business as they have to cover their initial costs and break even.
Also, relating to what we did, after all the financial projections we did, we also had to fill in the raiSE template as if we were really applying for raiSE. Doing that exercise, it made me realize that different businesses have different types of fundings that they can get and a start-up has to really find the perfect one for their company. Also, while doing up the financial projections, I also noticed that a business has to know all of their costs and expenses properly from the very start of business. It is a vital process to help forecast the sales and to attract potential investors. So, start-ups have to get all their costs and stuffs clearly listed out to have an idea how their business’s finances would be for the first few months or years.