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5 Financial Risks Startups Have to Take

By U.S. News & World Report

Everyone seems to be jumping on the startup bandwagon; people are coining themselves entrepreneurs in hopes of one day inventing the next Facebook or Pandora and becoming billionaires. We’re all familiar with the rags-to-riches stories many entrepreneurs experience, but not all of us understand the financial risks involved.

The startup life is brutal. Founders are expected to take extreme pay cuts and sacrifice certain luxuries in order to keep their startup afloat. In the eyes of entrepreneurs, putting everything on the line is what it takes to get ahead and succeed in the long run. Capital is tight and needs to be spent efficiently, but sometimes taking the occasional risk is necessary to get a project off the ground.

Here are five financial risks all startups should take if they’re serious about growing their business.

1. Minimize outside funding. Many new businesses focus on securing capital from outside investors like venture capitalists, but before you seek out an investor you might want to consider pulling out your wallet. Dig a little into your savings and retirement accounts to acquire the necessary funds to get your business venture started. It sounds incredibly risky (because it is!) but you’ll be hard-pressed to find an investor who will invest capital into your startup if you haven’t put some of your own money in first.

2. Hire a tax advisor. Nobody likes filing taxes, but the last thing you want on your mind while running a business is wondering if you’re meeting your tax obligations every month. As revenue begins to flow into your company, there will be various taxes your business will need to file. Hiring a tax advisor, while it’s an additional cost, will ensure your startup is following all the proper tax regulations to stay compliant. It’s a small upfront cost in the grand scheme of things.

3. Pay your employees. Recruiting your family members or hiring unpaid interns might sound like a great cost-saving tool at first, but remember that your long-term goal is to build a profitable business. It’s not enough to ask employees to forego pay in exchange for equity; if you’re serious about growing your company and keeping the talent you have, you’ll need to find room in your budget to pay your employees. But keep in mind: Paychecks aren’t the only things employees are looking for in the workforce. “Compensating employees well is not sufficient as a single tool to retain talent,” says Leon Ginsburg, co-founder of Chairlift.io. “Today’s workforce generation also looks for employment with organizations whose talent-management and development processes are light, intuitive, meaningful and user-friendly.”

4. Bring your developers in-house. It’s no secret that developing costs are expensive. If you’re building an online or mobile application, finding the right developers who are committed to your business will cost significant financial capital. However, long-term growth is virtually impossible without it. Outsourcing development needs can help in the short-term, but it’s not a viable option as your company scales. You want team members who are dedicated to your mission and believe in your vision; freelancers split their time between multiple projects and might not be able to focus on your needs 24/7.

5. Secure a physical office space. You can’t work out of your room forever, and there comes a day when you have to invest in a proper office space. “It’s a terrifying task to handle because the implications are huge – it means your startup is actually happening, and the scope of responsibility increases tenfold,” says Trina Felber, CEO of Primal Life Organics, which develops Paleo skin care products. Further, because the future is always blurry, investing in an office space is a leap of faith. The rising popularity of co-working spaces has helped companies with rental costs, but it’s still an investment that will grow as your company brings on more hires. With that said, it’s also one of the most important investments, acting as a milestone for entrepreneurs.

Money is a big concern for the majority of startups, but there’s more to entrepreneurship than worrying about finances. Startups encourage individuals to learn and grow as business individuals, and that includes taking risks with your business’ finances. The majority of the time, we’re taught to save our money and spend frugally to maximize our personal capital, but there’s no playing it safe in the business world. If you want to get ahead of your competitors and stand a chance at making it in your industry, your startup needs to take a financial leap of faith.

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5 Financial Risks Startups Have to Take originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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