AUTHOR: Jaan Larner
Being an entrepreneur is incredibly rewarding and whether you want to build an empire to last the ages or simply be master of your own career, starting your own business is a highly attractive option for people who have the drive and enthusiasm to create something from scratch. Even at the best of times, it can be challenging, so the advice in this series looks at the considerations new entrepreneurs need to bear in mind when they approach their new venture.
Avoid the temptation to run your cashflow to the limit. Cashflow is important for any business – but most crucially for a new one, where cash constraints can become a serious restriction to achieving growth. For these purposes, you need to be strategic and carefully develop your cashflow forecast. Monitor and revise this forecast closely, by the day, and acknowledge that there will be ups and downs, delays, and disasters. Be generous with your budget – when in doubt, over-budget – to cushion yourself as much as possible against any shortfalls; anticipate your financing needs in case you need to arrange for further funding and retain keen oversight and control of any debts.
Profits – which are what you are left with after you dispose of something over what it cost to acquire, convert and sell – will only increase if you: a) increase revenue relative to costs, or b) decrease costs relative to revenue. Where the opposite occurs, profitability will decrease, and if this happens for long enough, your capital will be eroded to the point of insolvency. As products or services age, their profit margins get smaller, and so taking the time to analyse market conditions and adapt is critical.
There are broadly three ways you can fund a new business – Grants, Debt and Equity
Deciding how to raise capital for your business is therefore a decision which requires careful thought and, ideally, a clear funding strategy: A growing business will often have several funding rounds, especially if it has an increasing valuation. Whichever route you take, you need to carefully consider the implications, which may be more or less suited to your business as it develops.
Jaan is an experienced commercial lawyer with over two decades of experience in his field, specialising in the full range of private corporate work including mergers, acquisitions, MBOs and joint ventures. His experience spans both sides of coin, having once been an entrepreneur himself, and with an MBA from Oxford.
Jaan and the Commercial Team at Vardags offer substantial expertise and outstanding strategic solutions on company and commercial legal issues, advising clients from entrepreneurs and SMEs to private multinational corporations. Included within the team are Reputation and Privacy specialists Alex McCready, Gregory Monk, Tessa McKeown and Eva Wallace, alongside leading litigator Frank Ryan, who can deal with any litigious or reputation-based matters which may be involved in your case.
The information on this website is intended as a guide and does not constitute legal advice. Vardags do not accept liability for any errors in the information on this website, nor any losses stemming from reliance upon the statements made herein. All articles and pages aim to reflect the legal position at time they were published, and may have been rendered obsolete by subsequent developments in the law. Should you require specialist advice, tailored to your situation, please see how Vardags can help you.