Generally, startups are formed by newly qualified individuals in any discipline or a group of people who work in a particular establishment and later form startups.
In most of the cases the group members are good and sound technical people who have less knowledge and awareness about financial management.
The start-up group members mostly concentrate on product or process development and may not have a proper finance plan on which depends the success or failure of an enterprise.
They should have a road map on the funds needed at different stages/phases of the enterprise growth and how it will be sourced, when to be sourced, cost of the funds, quantum of funds etc. Finance is the life blood of any organisation and that should be managed well for the healthy running of the organisation.
Generally, everybody concentrates on valuations which itself will not generate income.
Valuations serve the purpose of investment by outsiders, but if it did not materialise then what would be the alternative course of action plan?
Unless all the above questions are answered and documented properly, the chances of failure of a startup are very high.
According to some reports the failure rates among startups are 80% to 90% worldwide during the initial periods and again more than 80% of startups who have availed outside investments fail due to lack of financial planning and control of expenses.
Virtual CFOs can be of great help in planning and implementing a proper finance plan in any enterprise and their services are within the reach of every startup.
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