How can FinTech help reduce startup costs for small businesses

March 15, 2023

Launching your own small business can feel like a dream come true for aspiring entrepreneurs. After all, business ownership is a labor of love. It is an opportunity to earn a living pursuing your passions. And, there are few joys greater than that.

However, the dream of starting a small business can quickly turn into a nightmare when you confront the often jaw-dropping costs associated with startup. The good news, though, is that savvy entrepreneurs have a host of weapons in their arsenal when it comes to managing these startup costs.

Innovations in financial technologies, or FinTech, are helping small-business owners get their businesses off the ground without incurring an insurmountable mountain of debt. This article examines the myriad ways FinTech can help entrepreneurs manage startup costs for their small businesses.

Knowledge is power

One of the most important ways that FinTech is helping business owners reduce startup costs is through the awesome power of financial data analytics. Using FinTech powered by artificial intelligence and automation, entrepreneurs can gather the financial data they need to make effective, evidence-based business decisions.

Not only this, but AI and automation tools are enabling decision-makers to use data visualization in order to better interpret, assess, and communicate essential data. This both expedites the analysis and deployment of financial data and it decreases the risk of human error. The true import of financial data is easier to gauge when presented in visual form rather than in page upon page and column upon column of numbers.

Through financial analytics in general and data visualization in particular, business owners are able to immediately identify risks and weaknesses within the organization. This could include, for instance, pinpointing areas of excessive financial losses.

These data also can provide critical and timely insight into external market conditions, enabling decision-makers to respond to prospective threats before they can do real financial damage.

The result is a more agile, responsive, and streamlined operation in which financial waste, loss, and inefficiencies are kept to a minimum.

Process automation

Chances are, when you start a small business, you’re going to have precious little revenue to invest in new hires. In those crucial first years when you are unlikely to have turned a profit, the key is to maximize the value you can get out of every dollar you spend.

Ultimately, this is the great power and promise of FinTech, which extends far beyond financial data analytics. Innovations in FinTech also are allowing entrepreneurs to automate a wide range of financial operations, including digital payment processing and automated invoicing.

Automation can save small businesses money in a wide variety of ways. First, it significantly decreases the likelihood of costly human error.

Second, it eliminates the need to hire new workers or delegate existing employees to perform these financial operations. This enables entrepreneurs to run their businesses with a lean cohort of employees.

Third, automation enables small businesses to reach a truly global market. For instance, digital payment systems allow business transactions to be completed online from anywhere in the world. This means that entrepreneurs can expand their operational reach dramatically without incurring the costs of opening a physical storefront.

At the same time, access to the global market provides the ability to grow the business and cultivate a wide range of revenue streams, all of which can be used to mitigate financial risks. In periods of economic uncertainty, small businesses can draw on these diverse markets to provide the financial cushion needed to guard against shocks in any sector.

Facilitating funding

Another benefit of FinTech for managing the startup costs of a small business lies in its capacity to expedite the funding process. Thanks to FinTech, it is now easier than ever before for small-business owners to apply for, and receive, small-business loans entirely online.

The efficiency and security of the online application process make the process of securing funding for startups faster and more affordable than perhaps ever before. But, it’s not only in the initial processes of funding that online applications make a critical difference.

Digitalizing the loan application process also enables entrepreneurs to reduce costs by shopping around for the best funding opportunities. Through FinTech, small-business owners can access both traditional and alternative lending sources, from identifying the business credit card with the best rates to raising funds through crowd-sourcing.

These tools can even enable aspiring entrepreneurs to connect with prospective investors offering traditional and micro-loans to cover some, most, or all startup costs.

Budgeting and spending

For all its sophistication and complexity, perhaps FinTech’s greatest strength is in its simplicity. FinTech is the ultimate budgeting and spending tool. FinTech enables entrepreneurs to take a mission-focused approach to their financial operations.

This helps entrepreneurs create budgets that align with the business’s needs and goals for the short term and also helps direct them toward the attainment of a bigger, broader vision. As a part of this budgeting process, FinTech also helps entrepreneurs avoid excess spending, enabling business owners to identify opportunities to cut costs.

And when you learn to avoid unnecessary expenses, you come one step closer to achieving your long-term financial goals for your fledgling business.

The takeaway

Starting your own small business is truly a passion project. It’s a labor of love, but it’s also a daunting challenge. After all, few small businesses survive their first five years.

However, there is no need for the ambitious entrepreneur to despair. Success is possible. The key is to start out strong by being proactive in managing your startup costs. And innovations in FinTech can be your ultimate secret weapon in making that happen.

FinTech can help entrepreneurs manage their startup costs through robust and timely data analytics and automated data visualization, all of which help business owners make sound decisions.

Similarly, FinTech can automate a range of financial processes, from accounting to online payment processing. Not only does this reduce labor costs but it also helps to dramatically expand a business’s market reach.

Above all, FinTech is the quintessential budgeting and spending tool, enabling business owners to avoid excess spending and achieve their business’s financial goals.

PIA has tools to help

PIA Northeast is committed to assisting association members with their business-building needs.

Through Steps to Success, PIA members can obtain information on specific business considerations for agency owners, including the following:

  • Licensing
  • Business planning
  • Financial planning
  • Sales and marketing
  • Office organization
  • Personnel management
  • Internal workflow
  • Technology issues
  • Reference resources
Katie Brenneman

Katie Brenneman is a passionate writer specializing in lifestyle, mental health, education, and fitness-related content. When she isn't writing, you can find her with her nose buried in a book or hiking with her dog, Charlie. To connect with Katie, you can follow her on Twitter.

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