RACO Investment founder Randall Castillo Ortega explains fundamental financial decisions of any startup

Making great money decisions is like eating eggs for breakfast instead of a doughnut. This is exactly what you need to do as a mature adult. There is no perfect person. It’s not enough to go from paycheck to paycheck in the business world. Your financial decisions will impact your income and influence your business. Randall Castillo Ortega is the founder of RACO Investment, an SME investor in Costa Rica and Panama, and shares his insight on the critical financial decisions that entrepreneurs must make.

Private companies that fail in the first year are often because they struggle to settle on good money-related decisions. You need to understand how much money your business will require to keep it afloat. Online advisors don’t need to have a lot of money because their out-of-pocket expenses are low. If you own a boutique selling mid-sized attire, you will need sufficient money to pay for stock, leasing, and representatives.

Your net consume rate is the amount of cash that you have left over after subtracting sales and expenses. If you have $90,000 in sales, and $30,000 in expenses, then your net consumption rate is $60,000. Next, calculate how much cash you plan to use in the next 12 to 15 month. This should be part of your field-tested strategy if you are a startup.

Consider the current phase of your business. A startup will require different money requirements than a business that is established. Consider how long it will take to raise more money if you have to – is it possible to do this in a matter of days, weeks or months?

These calculations have given you a rough estimate of how much money is needed. Next, you need to figure out where this money will come from. Castillo says, “Ideally, your business develops naturally and builds its own wealth as it grows.” You can also nestle small dogs with a simple click of your finger. You should consider other options if your existing funds aren’t sufficient or your business isn’t growing naturally.

There are options to obtain a customary loan from a bank, cash for your home or a credit extension at your bank. There is a good chance you’ll be turned down because you’re an entrepreneur. It is a better option to ask family members or financial professionals for advice. Many entrepreneurs are seeing success with GoFundMe and other business gathering pledges.

As your company grows, you might need to think about hiring more people to fulfill the same responsibilities. A larger staff means more finances and more management. The decision about whether additional weight is worth it will be made in a more intense manner. Del Vecchio says that there are many positions that can be outsourced. This will save you money. It is not difficult to bring the positions back in-house when the opportunity arises.

It’s like thinking your business will grow without spending money on marketing and sales. Explains Castillo, “When you are just starting out, it can be difficult to spend cash on marketing because you haven’t put aside the cash you need to grow the business. But if you don’t show your organization, you will struggle with money.” You should consider spending 10%-15% on marketing. Although it may seem like a lot, if you don’t, your business won’t be able to grow.

In any case, you may be spending every penny that you make. It is difficult to not. If you have a decent month, the extra cash should be spent on the business to grow it or for yourself. It is important to keep some cash aside for the future. There will be situations you didn’t know existed. You might find that your roof needs to be supplanted, some gear is broken, or you are being sued. These are all possible.

Sound judgment is key to being a successful entrepreneur. There are many ways to reduce risks and make sure your business succeeds. The key to success is having a good grasp of finances.

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