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How to Build Your First Balance Sheet as a Startup?

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StrategyDriven Managing Your Finances Article |Balance Sheet|How to Build Your First Balance Sheet as a Startup?If there is one area of your startup that requires maximum attention to detail, it is the financial aspect. No successful business attained the height it has reached by neglecting the details of its financial activity.

Having a detailed financial system in place helps to increase transparency and accountability within the business environment. It also helps to know whether there is a loss or profit and the reasons for such. Most importantly, a detailed report of your startup’s financial activity over a definite period will come in handy when reaching out to investors.

One of three documents that your startup has to draw up every year is its balance sheet. Here, we shall be examining a balance sheet, what it includes, and how to build your first as a startup. Let’s start with what a balance sheet is and what it should include.

A balance sheet is an accounting document where both the credit and debit sides are balanced.

What Should Be On A Startup Balance Sheet

A balance sheet is a comprehensive financial document that examines all the assets, liabilities, and shareholder’s equity that belongs to a startup and how they were used within a financial period.

It provides an analysis of credits and debits and what every penny was used to achieve. If carefully drafted, it is expected that both ends of the balance sheet, which are the debit and credit sides, should be balanced after every calculation has been made.

From the above, you can see that there are three main components of a startup’s balance sheet, and they include:

Assets

Assets here can be current or non-current assets, and they include everything that the startup owns within a given period. Assets can be tangible, which refers to those assets that can be seen and touched like properties.

A startup can also have intangible assets that you cannot feel or touch, like goodwill. Every business should identify its assets and why these assets were obtained.

Liabilities

While assets are those things a company owns, liabilities are those things a company owes. Liabilities can also be current or non-current liabilities. Startups need to know what they have as assets and what their liabilities include.

Shareholder’s equity

Shareholder’s equity refers to what is left when a company has paid off its liabilities. It is the remainder of assets after liabilities have been settled.

A well-drafted balance sheet should have these three concepts captured accurately in it.

When A Balance Sheet Is Not Balanced

The whole essence of a balance sheet is that the debit and credit sides should be balanced at the end of every calculation. However, there are instances where after all the entries, the balance sheet won’t be balanced.

You may notice an imbalance after every entry has been inputted, and you are wondering what is the cause.

Some of the factors that can be responsible for a balance sheet not being balanced include:

  • Incorrect or incomplete data
  • Wrongly entered details
  • Mistakes in exchange rates
  • Mistakes in inventory
  • Wrong calculations

After imputing the details, review the sheet again.

Building Your First Balance Sheet as a Startup

As a business owner, you don’t have to wait until you own a big business before building your balance sheet. Immediately after your startup launches, you should start putting steps in place to draw up a balance sheet.

Your first balance sheet may not be as perfect as subsequent ones. It is possible that, in the end, the balance sheet may not be balanced. Instead of getting worried, you can review it to check if any of the factors listed above are responsible for why it isn’t balanced.

To build a perfect first balance sheet as a startup, here are some vital steps to follow:

Set a report date and range

A balance sheet is not an indefinite document. Like every other accounting document, it is expected to cover a specific range. So, your first step to building a balance sheet for your startup is to set a report date and range.

Conventionally, a balance sheet is to be drawn up every year. However, some businesses have chosen to make theirs after every quarter or the first half of the year. Regardless of which of these options you are going for, setting a report date and range is necessary.

A good example of this is to have a balance sheet from 1st January 2021 to 30th June 2021.

Identify your assets and liabilities

After you have set a report date and range, the next step is to identify your assets and liabilities. It is impossible to build a balance sheet when you don’t have a comprehensive idea of what you own and owe.

Determine your shareholder’s equity

As earlier pointed out, your shareholder’s equity is what is left after you just have subtracted what you owe from what you own. If you can successfully identify your assets and liabilities, determining your shareholder’s equity will become easy.
Worthy of note is assets and liabilities identified, and shareholder’s equity determined must be within the range fixed when starting this process.

Carefully enter the details

All the steps that have been discussed above are geared towards ensuring you have the correct statistics. With all these statistics at your disposal, the next step is to enter the details into the sheet. In doing this, you have to ensure they are correctly entered.

Pay attention to all the data to be sure they are complete and reflect the current state of the startup. Avoid mistakes in exchange rates and inventories.

Conclusion

The process of building your first balance sheet as a startup is not as complicated as you might have thought it to be. Provided you understand a balance sheet, the purpose it serves and can follow through on the steps provided above, you can create one in no time.

However, where it appears that after several trials, you’re not getting the right results, you can seek the guidance of a financial expert to guide you through the process. You can also surf the internet for more information from professionals on building a balance sheet.

References
CFI: What is a Financial System?
HBS: HOW TO PREPARE A BALANCE SHEET: 5 STEPS FOR BEGINNERS
Wallstreet Mojo: Difference Between Current and Non-Current Assets
Dummies: Current and Noncurrent Liabilities on the Balance Sheet
Chron: How to Review an Unbalanced Balance Sheet

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The Product Experience Kept Clothing Sales Going

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StrategyDriven Customer Relationship Management Article |Product Experience|The Product Experience Kept Clothing Sales GoingClothing is one of the industries that has done very well during the pandemic. Despite people not necessarily going to work, partying and traveling, clothing sales have not fallen. Latest figures suggest a 10.6% boost. Despite the recent challenges businesses however, have not seen a plunge in consumer demand. This throws up a lot of questions about ‘the product experience’. This is all about the experience of looking at the product online, delivering it, opening it and putting it on for the first time. It is in this journey that a loyal customer is forged. Let’s see how your product experience should be devised.

Online inspection

When a customer looks at a clothing item online, they do a number of things.

They zoom in! Always take high-quality photos of your clothing. Customers want to zoom in, inspect the material, pattern, designs, color scheme, fit, length, quality etc.
They want to know the size. Always tell the customer what size the item in the photo is, and what dimensions the model wearing them has. For example, ‘this jumper is L size, our model is 6ft 1’.
They will want to know the design or style. In other words, always tell this what type of clothing it is, i.e. ‘this jumper is crew neck, with elastic cuffs’.

Packaging and delivery

When the product is shipped, it must retain its shape. A lot can happen on its journey, such as being thrown around, dropped, kicked, or shaken around. So the item can hold it’s shape if it is packed correctly.

So place some support tissue paper between each fold. If you are selling a jumper, place supporting paper between the back and the arms and between the arms as they are folded onto themselves too. Place extra support around the sides of the box. Any empty space should be filled with any kind of relevant support you can buy, such as bubble wrap. The delivery should be smooth and timely, so the item is not rushed and therefore, most likely squashed around on the way to the front door of the customer.

The product experience

When the customer first opens the package, they should be greeted with your packaging. This lets them know that the item has been cared for, it will be brand new and it will start it’s new life with them i.e. it hasn’t been worn before (crumpled, creases, etc). A unique thank you note or company slogan on a folded tag is a must. This folded hang tag printing service is great, everything is customized to your order and it’s affordable. These tags should be read-worthy for customers. Maybe place a logo on the front, finish it in matte or gloss, and write something interesting inside. This makes the product experience so much more unique and yet it’s not going to tax you budget-wise.

The product experience should never be underestimated. It’s what has kept the clothing industry so resilient and let’s face it, we all enjoy opening our package of new jeans, tops and jackets.

Growth Mindset Should Be a Part of Your Business Strategy

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StrategyDriven Strategic Planning Article | Growth Mindset Should Be a Part of Your Business StrategyAn organization that embraces a growth mindset positions itself to thrive. A growth mindset encompasses a set of behaviors and attitudes that reflect a business owner’s belief that their company’s business model is not set in stone. Such an entrepreneur is open to infusing new talents, innovations and creativity into the business to strengthen it and guarantee its longevity.

Aside from adjusting your business model as part of your growth strategy, you should also hire flexible employees with the capacity to learn and grow with the business. Your staff needs to share in your ambition to develop a future-oriented business. They should be ready to take on new roles, advance their skills and evolve with the company’s growth.

You will also rely heavily on integrated learning tools that facilitate employees’ professional development and streamline business operation. An Integrated Learning Systems (ILS) mindset growth arms the learning and development (L&D) department with accessible solutions for the evolving business operations.

Striving to become truly good at what you do guarantees that more customers will want your services. A growth mindset enables your business to stand out because it ensures you put in the work to achieve the company’s full potential. Continue reading to learn how incorporating a growth mindset in your business strategy helps you add value to the company.

Embrace Integrated Learning Systems

So how do you ensure you have talented employees by your side as you prepare your business for exponential growth? Integrated learning systems (ILS) is the solution you should embrace to provide your workforce with the necessary training to withstand the roller coaster ride of change as the business evolves.

How can you train your growth mindset and ensure your employees are more knowledgeable and competent in their jobs? Technology-based employee training offers a stack of solutions that address all parts of their learning needs. ILS mindset growth enables your business to shift towards digital learning and earn the massive benefits of training your team to execute development projects better.

ILS provides your company with a vast library of content suitable for end-to-end corporate training solutions. The system’s continuous micro-learning allows your staff to master new skills in the flow of work. Such a modern integrated learning solution that embraces all types caters to different types of employee development needs.

You also gain access to various forms of skills assessment to deliver skills-driven learning. This way, your employees can be more productive and better positioned to satisfy your customers.

Build a Culture of Taking Risks

To embrace a growth mindset is to accept that failure is an inevitable part of growth. But this should not hold you back from stepping out of your comfort zone. Oftentimes, when entrepreneurs recognize their weaknesses, they end up holding on to their failures as well. But working on one’s weaknesses does not mean you carry your failures as a burden.

When you focus on your failures, you’re distracted from the potential success your business can achieve in the future. Instead, claim and learn from past failures, then focus on growing from the mistakes. Building a culture of taking risks enables you to feed creativity and innovation into the business to fuel it forward, notwithstanding the risks involved.

Ensure you lead by example by practicing controlled risk-taking to allow the business to expand beyond your established market segment. Additionally, allow your employees to take on leadership roles that require them to learn how to think on their feet. If you don’t empower your employees to take some risk, they cost the company money by playing it safe.

Forward-thinking employees will learn from their mistakes and utilize their freedom and independence to tap into new markets. While it will take some time and effort, the risk is worth the reward.

Understand Your Purpose

For your business to stand out based on its specialty, you need to be purpose-driven, doing what you love for the people that love what you do. Purpose helps you define your company’s reason for being beyond profit. Ensure the purpose you establish for your business encompasses the company’s ultimate role in the broader economic, environmental and social context for years to come.

While on the surface, the products and services you offer keep your business running, a clear purpose that defines the impact your company can make guarantees its longevity. Define and articulate your purpose in a way that enlightens your employees and propels positive change. An elaborate purpose will:

  • Inform your long-term business strategies
  • Establish a competitive advantage in a saturated market
  • Inspire innovation
  • Boost brand visibility and brand credibility

Your employees will be motivated to go the extra mile to put your business on the map when you establish a relevant and aspirational purpose for your organization. Your purpose will be like the north star that guides day to day business operations towards a specific goal.

Conclusion

To become a forward-thinking company, you need to incorporate a growth mindset in your business strategy. It’s essential that you think and act differently in order to position your business on the map. Use these solution-driven approaches to unleash your business’ full potential.

You Can’t Be All Things To Your Business

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Realising that your business needs to you be one step removed from the changing fortunes of its success never happens in the early days. In those frantic days, you live and breathe everything that is connected to your fledgling company. And that’s how it should be: without your energy, the company would be nowhere. However, there comes a point where you can’t be dying a thousand deaths a day just because some small details have not turned out as you had planned. You need to step above the humdrum of the daily concerns and think much bigger about your company and its future. It’s the only way you’ll achieve the levels of success you want to achieve. Here’s how you do it.

StrategyDriven Entrepreneurship Article
Photo courtesy of Pexels

Trusting Others

When you began your company, you were probably in charge of everything that happened. You assumed many roles in an amateur fashion in order to get things done. This was your baby, and it was to be born in your creation. Now the company is off the ground, though, it is no longer your baby. It’s able to walk on its own two feet, and it needs to have the best around it to make sure it stays on course. If you hire people to do a job for you, then actually trust them to do the job for you. It’ll be hard not being in control of absolutely everything, but your company will be better for it in the end.

Switching Off

You can’t be on call 24 hours a day for your business. You’ll burn out far too quickly if you try to do that. Instead, you need to have systems in place that enables you to switch off without worrying what’s happening with your business. If it’s online, then integrating SIEM (security information and event management) will give you the peace of mind that your website is well taken care of, even if you’re not in a position to see it for yourself. Similarly, if you have a whole team who are tasked with making sure that your social media profiles are updated in line with the company philosophy, there’ll be no need to be on your phone every few minutes making sure the right content is being posted. Switch off. It’s the right thing for you.

StrategyDriven Entrepreneurship Article
Photo courtesy of Pexels

Controlling What You Can Control

You control what you can control, and adapt to the other things that happen that you can’t. Realising that there will always be some things that just happen to you is a good lesson to learn as a business leader (also good to learn this as a human being, too!). Instead, you should be pouring your energy into winning what you can win. If you’re fretting over insignificant details that might yield small results, then who’s taking care of the tasks that will yield the big results? If it’s not you, then it’s nobody. Use your skills wisely and you’ll get a much higher return on your efforts. You can’t be all things to your business, so just be things that you can be well!

Why You Should Buy A Nearly New Car

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StrategyDriven Practices for Professionals Article |Nearly New Car|Why You Should Buy A Nearly New CarWhen it comes to buying a car people generally think of two categories, new or used. You might prefer to buy your car new. A car with next to no miles on the clock that has never been driven by another sole before. New cars can commonly be bought from Manufacturer’ main dealerships. There certainly are positives to this. Buying a new car gives you the full manufacturer’s warranty, which can be as much as 10 years. You will be able to order the exact specification you want on that car and there is no unknown car history to worry about. Brand new cars also benefit from the latest technology, safety features, and fuel efficiency. There is a lot to be said for spending big on a brand new car. That is however the downside and a big one. Buying a new car comes at a premium. You will be paying top dollar, and the value of that car will depreciate the second you drive it off the forecourt. It can depreciate as much as 20%.

Then there is buying used cars. Buying used cars will allow you to avoid taking that huge hit in depreciation. Used cars are, of course, also cheaper than new cars. You pay a reduced price to reflect the fact someone has already owned, driven, and used the car before you have. You can buy used cars from dealerships or private sellers. If you buy a used car from a dealership you will also get legal recourse should there be a problem with the car soon after purchase. Alternatively, you can buy a used car from a private seller. This option will save you money in that the purchase price will be lower but you will not get the same protections as if you had bought from a dealership. Of course one of the biggest drawbacks of buying a used car is that you are to some extent buying the unknown when it comes to the car’s history and previous usage.

Then there is a third option that isn’t so widely known, buying nearly new cars. Nearly new cars are often cars from a dealer’s demonstration fleet of cars that they have bought to meet certain targets dealers may have. Alternatively, nearly new cars are vehicles that have had an owner for a matter of months, no more than a year. A good place to look for nearly new cars are manufacturers’ main dealerships or used dealerships known for buying and selling new or high-end cars, for example, if they advertise the fact ‘we buy 2021 cars’ you know they will be selling (very) nearly new vehicles. Buying a nearly new car will allow you to benefit from the extensive manufacturer’s warranty, they will still have around 90% of the warranty left, if not more. You may not be able to order the car to the specifications of your choice but you will be buying an ultra-modern, high-tech car that benefits from the new safety features, keeping you safe on the road, and the latest mod cons of a new car. Without paying the price of a brand new car. What is more, buying nearly new will take away a good chunk of that depreciation value. Ultimately, your money will go further.

There are of course some downsides to buying nearly new, namely that it will have an extra name on the registration document and this will decrease the value of the car when you come to sell it, as you will be the second owner. Even if the first owner only did 100 miles in it. The more owners a car has had, the lower the resale value it will have. All nearly new cars will have some mileage on the clock, no more than 1000 miles so the efficiency and functionality of the car won’t have been impacted, but it won’t of course be ‘brand new’ and have that ‘brand new’ never-been-used feel about it.

Whilst there are some drawbacks to buying nearly new, the benefits are extensive. Weigh up what is more important to you and whether those negatives are a price worth paying.