Reasons that start-ups burn through all of their money

When you're securing funding for your new business, it feels like you'll have no problem getting everything you need. You have a lot of interested investors. You started with a dream and no capital, so everything you bring in massively expands what you think is possible.

Twelve months later, though, you're on the verge of running out of money and declaring bankruptcy. What happened? How did you burn through everything so quickly, ruining what was otherwise a good business idea?

This is a common problem for start-ups and small businesses. Here are a few reasons why it might happen:

  • You do not have enough financial education. You have a great business idea, you work well with people and you have a vision. However, you don't know everything you need to about the financial side of running the company.
  • You have enough money for product development, but not for marketing. It costs money to get things off the ground, no matter how great your product is.
  • It takes too long to start bringing in money to cover your costs. Your business can only pay its employees for so long on what you already have in the bank.
  • You're only looking at the short-term plan. Your finances work out in the moment, but you never planned for long-term success.

These are just a few potential issues that could impact your company, or it could be something else entirely -- such as a new type of competition that you couldn't plan for at all. No matter what, make sure you know what bankruptcy options you have and how they can help.

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