2015-09-23 00:00:00Money & FinanceEnglishhttps://quickbooks.intuit.com/in/resources/in_qrc/uploads/2017/05/02.-How-to-survive-in-the-time-before-your-startup-becomes-profitable_Hi-Res.jpghttps://quickbooks.intuit.com/in/resources/money-finance/how-to-survive-before-your-startup-becomes-profitable/How to survive before your startup becomes profitable

How to survive before your startup becomes profitable

2 min read

Before the big numbers can appear on your cash flow statement, here are a few ways you can survive before the break-even point in your small business

It is understood that startups don’t typically make a profit from the get-go. There’s often a lean period before revenue starts coming in, when entrepreneurs need to be creative to keep operations going. Among the many ways to survive the first few months in that crucial beginning-of-business phase, there are a few options that could help sustain your business in the meantime until you turn a profit. 

Focus on the revenue generators first

Before the big things in the company can happen, work with a platform that low upfront development costs and a business model that generates cash quickly for the time being. For example, websites are cheaper to build than brick-and-mortar stores in many cases, and an online store can start making sales much earlier. 

 

This partly explains why India is seeing a boom in e-tailing startups like Snapdeal. Being able to show business traction, such as a proven sales record, also makes it easier to attract investors.

Bootstrapping and self-funding

Bootstrapping may not be glamorous but saving money the old-fashioned way and self-funding has worked for many entrepreneurs. A good way to start is by making a business plan and determining how much money you need to survive until revenue comes in. This will establish whether its a viable option.

You can also approach family members and friends first, but as this can become a sensitive issue, make sure you are borrowing money that your lenders can afford to lose, and ensure that a written agreement is in place for every personal loan.

Look towards government grants and schemes

Although it is recognized that small business financing is an issue in India, there are a number of avenues that startups can look to via the government. Bodies such as the Small Industries Development Organisation (SIDO) and the Kerala Financial Corporation (KFC) offer a range of schemes that have been endorsed by the government to assist small businesses in working capital funding, microfinancing and project-specific financial support. To know what kind of support you need, work out what’s needed to make your cash flow statement balance itself conservatively on a monthly basis before you apply to these grants and schemes. 

Join an incubator

Another option is to join a startup incubator. These help entrepreneurs develop their businesses by providing support, such as with a physical workspace, coaching or technical services. Incubators can also provide venture capital.

New incubators are regularly opening up in India. Some of the most active ones include Mumbai Angels, Indian Angel Network and Powai Lake Ventures, while many universities, Indian Institutes of Technology (IITs) and Management (IIMs) also run incubators.

Incubators differ in the kind of support they provide and most have target sectors, such as e-commerce or health. So its good to research first and find out which is the best fit for your venture.

Now you know some of the secrets to surviving in lean times, you can sit down and decide what might work best for your needs. Do you have the saving power to bootstrap? Would your family chip in? Are grants available for your business? Remember, many startups make it through using a combination of techniques, so theres no need to limit yourself. 

To learn more about other practical issues facing Indian small businesses, click here.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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