{"id":21848,"date":"2023-02-24T11:59:17","date_gmt":"2023-02-24T19:59:17","guid":{"rendered":"https:\/\/foundersnetwork.com\/?p=21848"},"modified":"2026-04-15T15:10:47","modified_gmt":"2026-04-15T22:10:47","slug":"startup-financials","status":"publish","type":"post","link":"https:\/\/foundersnetwork.com\/startup-financials\/","title":{"rendered":"Startup Financials 101: Everything You Need To Know"},"content":{"rendered":"

Every startup founder needs a basic understanding of startup financials to be successful.\u00a0<\/span><\/p>\n

Like a car, your startup won\u2019t go without gas in the tank.\u00a0<\/span><\/p>\n

The destination is far. If you don\u2019t use a map, watch your gauges, refuel, and change the oil, you\u2019ll break down.\u00a0<\/span><\/p>\n

Nine out of ten startups fail, and <\/span>82% of those failures are from cash flow mismanagement.<\/span><\/a>\u00a0<\/span><\/p>\n

So it\u2019s time to take the initiative and do the math because you can\u2019t afford to wing it, especially with a recession ahead.<\/span><\/p>\n

You might already have investors and staff depending on you. Or maybe you\u2019re still on your own with personal savings and\/or debt on the line. Either way, you owe it to <\/span>someone<\/span><\/i> to do your due diligence when it comes to managing your startup\u2019s finances.\u00a0<\/span><\/p>\n

Use this comprehensive guide to take control. We\u2019ll help you brush up on startup finance fundamentals, bookmark key metrics, anticipate challenges, follow best practices, and prepare for harsh economic conditions.<\/span><\/p>\n

Startup Finance Fundamentals<\/span><\/h2>\n

Startup finance is a far cry from finance at an established business.<\/span><\/p>\n

Most startups take <\/span>three seed rounds and almost two years<\/span><\/a> to establish a product, user base, consistent KPIs, and revenue.\u00a0<\/span><\/p>\n

However, even in the early stages, having a firm grasp on startup finance fundamentals is vital. Key startup accounting records like income statements (income and expenses) and financial projections can be essential in securing funding that might ultimately make or break your startup. Here are a few of the fundamentals.<\/span><\/p>\n

Basic Startup Accounting<\/span><\/h3>\n

Getting started is simple. Regardless what phase your startup is in, you need a basic income statement that allows you to manage revenue, operating expenses, and net income. Simply track revenue and costs in a spreadsheet, and subtract expenses from income to get net income.\u00a0<\/span><\/p>\n

As part of the accounting process, you must meticulously account for every cost. This should include easy to overlook costs like shipping, taxes, insurance, payment processing fees, and utilities.<\/span><\/p>\n

Later, use the net income figure to create a cash flow statement. Your cash flow statement will yield a cash balance to feed into a balance sheet tracking finances and retained earnings over time. Ultimately this will enable you to create a solid financial model and forecasts.<\/span><\/p>\n

Looking Ahead<\/span><\/h3>\n

Financial projections are vital to the fundraising process because they’re essential to prove yourself to potential investors. You’ll need to demonstrate possible, solid ROI with stats when the time comes.\u00a0<\/span><\/p>\n

Here are a few positive signs investors like to see in financial projections:<\/span><\/p>\n