How Modern Startups Routinely Get Into Financial Trouble

When you think about the opportunities that modern businesses have to make money and generate a profit, it is surprising that any of them get into trouble. You would have thought that with all of the financial, legal, and technological support available to modern startups that failure rates would be going down. They’re not. They’re on the rise.

Modern businesses get into trouble for all kinds of reasons, but most of them are entirely avoidable. It is usually an issue with the decisions that top management makes instead of anything “out there” in the real economy.

In this post, we’re going to take a look at some of the reasons why modern businesses get into trouble financially, and what you can do to prevent the same thing from happening to you.

 

Failing To Understand The Nature Of Social Media

Social media is a very different marketing tool from platforms in the past. Historically, companies could dominate the narrative, presenting themselves in pretty much any way they wanted, without immediate feedback from the community. That, however, has all changed, and now firms must interact in two-way conversations with thousands of online followers and subscribers.

For many companies, the change is of biblical proportions. Companies get into trouble when they post things that some members of the community doesn’t like. These people then amplify the outrage, causing it to spread like wildfire from person to person, almost in an instant.

Not understanding social media, therefore, can lead to a situation in which you rapidly have a public relations disaster on your hands.

 

Failing To Understand Cash Flow

In the past, cash flow was a massive concern for companies – and it still is today. But new financial instruments mean that it is no longer necessary.

Cash flow is a hot potato for companies, especially startups. You could have the best business in the world, but if there isn’t money in your account right now, you can’t pay staff wages – and that’s a problem.

Here’s where invoice factoring can help. A third-party company buys the invoices in your accounts receivable, providing you with instant cash, and then chases up clients on your behalf to retrieve the money.

It’s a great way to get yourself out of a bind if a supplier won’t send you the money you need on time, providing a kind of financial cushion.

 

Failing To Attract The Right People

Businesses live and die on the back of the people who work for them. Companies who can muster fabulous teams tend to be able to weather even the most severe economic storms. Those with low-quality employees, by contrast, don’t.

Not attracting the right people is one of the main reasons why companies fail. Firms that succeed tend to have a certain energy about them. Everyone is fully focused and committed to enabling the firm to achieve its goals. When they’re not, it leads to low morale, productivity, and innovation.

People are just showing up for a paycheck. They don’t believe in the mission of the company.