Posts in category: Business

What are the common mistakes that startups make in a financial model, and why must you avoid them at all costs? As you might already know, financial modeling plays a major role in startups. It is considered an indispensable tool for startups and founders. An entrepreneur might create a financial model for garnering investor interest or strategic planning, like calculating runway and deciding budgets. Nevertheless, financial modeling usually involves a spreadsheet, where complexity and confusion can increase without the proper precautions. Now, you may want to dive into a spreadsheet right away. But it would be best if you went ahead with a concrete plan. That way, you could avoid a lot of mishaps. In this post, we present to you some of the most unfortunate mistakes that startups make in their financial models. Learning about these mistakes will help you to avoid them at all costs. 

1. Hardcoding projections and assumptions

Hardcoding values in a financial model is one of the most common mistakes made by entrepreneurs. It definitely shows a lack of experience. Plus, it implies that you lack a fundamental understanding of the model’s purpose.

You have to keep this rule in mind: only revenue and costs should be inputted manually. The rest of the model should then be modified as per these inputs. Suppose that the additional values are hardcoded. If that’s the case, then you are essentially increasing the complexity of the model. Some changes might not even be reflected if these additional values are not changed manually again with respect to the new inputs. This makes it more challenging to go back and make adjustments to the inputs. Plus, you risk hiding certain assumptions. More than anything, hardcoding values showcases a lack of discipline. This could lead investors to doubt your potential and be skeptical of the reliability and transparency of your business.

So, how can you minimize such issues? What you can do is double-check to make sure that only two values are hardcoded: revenue and cost (also known as expenses). Keep in mind that the majority of your model should come from interlinked cells and formulas that update dynamically given different inputs.

2. Forgetting who your audience is

Most startup financial models used for fundraising are usually internal planning tools. However, there is no need to highlight that fact. When a third party goes through the model, they should be able to figure out how to extract the model’s gist. 

Make sure to showcase your assumptions clearly and logically. It is important to use formulas to “show your work.” Some entrepreneurs make the mistake of using hard-wired numbers. Remember to avoid this mistake so that the reader can understand the calculations.

What if headcount tables don’t specify the function or title of the resource? Trust us: this could be such a letdown to the reader as a very prominent typo.

Keep in mind that most investors and all VCs have usually had formal financial training. They can instantly spot a formula error. Certainly, you don’t want to make a presentation with typos for investors to see. That’s why you should ensure that you audit your financial model before you send it out. It would be best if you could get someone else to double-check it or work on it for you.

A good tip you can try out is sending your model to a colleague or fellow founder and getting their feedback to find the three deliberate errors. This can help you find any issues that you may have missed.

 3. Missing details that investors want to hear

Not considering what the investors want to hear is a huge mistake made by entrepreneurs. Surprisingly, a lot of entrepreneurs make this mistake. They present financial models to investors without demonstrating the growth potential an investor requires. Of course, investors know everything won’t turn out exactly as initially planned. However, they do expect to see statistics that generate potential target returns.

Likewise, investors are concerned about the money. So, your financial model should especially demonstrate how their funding will be deployed. They would want to know over what time period the funding will be deployed and what the startup business will have achieved due to that investment. You also have to show them how much additional money will be needed before your startup will reach break-even and the amount of money a mature business can generate.

4. Not having a plan for the future

You cannot deny that a solid plan is a key to the success of any business. Projections are based on actual assumptions, not a finger in the wind. These guide the business as it grows while also ensuring that smart practices are incorporated based on actual assumptions, not a finger in the wind. These guide the business as it grows while also ensuring that smart practices are incorporated. Note that smart moves should be present from day one. Forming good habits from the beginning helps you to be better right out of the gate. Making a mess in the early days will only make you mop it up for the years to come.

Make sure to keep the books clean from the beginning, and trust us—you’ll see the benefits in the long run. Being GAAP-compliant as much as possible will help you over time. You also cannot undermine the compensation decisions you make today. Suppose you’re doling out stock or options. Then invest in a 409A valuation once a year and anytime a major event occurs (like a major financing deal). Doing so will keep you out of trouble with the IRS and ensure that you accurately account for stock compensation.

Focus on long-term efficiencies 

The takeaway here is that it is important to focus on long-term efficiencies rather than just focusing on the short term. Of course, an exit strategy might sound unrealistic. Still, it should always be present when you make decisions. When the time comes to go public or to make the company look attractive to an acquirer, the amount of work involved is huge—it can be even heavier and make any deal shaky if you make several mistakes along the way. So make sure to set your financial processes in place to scale. Remember that this is for long-term benefits.

5. Ignoring compliance

Ignorance is never an excuse that regulators let slide. Keep in mind that the risks are way too great to be in denial. Instead, you have to get it done. Auditor and government interference can make things downright unbearable if you don’t. And growth could stall as senior leaders get pulled away from their daily tasks to handle pressing inquiries. Apart from the high stress involved, audits are disruptive to the business. Troublesome findings can end up with interest charges and penalties. If that happens, there’s also a risk of losing the ability to continue the business.

Of course, private companies have a relatively lighter compliance load than public companies. Yet, the list is still long, between labor laws, tax returns, secretary of state filings, federal and state regulations, etc. Work with compliance experts who can help your company stay up-to-date. That way, you can fully focus on growing the business.

6. Formatting inconsistency

Suppose you absolutely need to include additional hardcoded values. If that’s the case, make sure to group the fields together in the same tab. Title those as “inputs” and apply different formatting to them.

Usually, the “inputs” and “assumptions” tabs need to be first in the spreadsheet. That’s because it determines the outcomes of all subsequent projections. If you incorporate good organization, you’ll be able to minimize the complexity of your model. That makes it more accessible to different viewers. The reason this is important is that the models can be shared, presented, and printed.

We assure you that organization and formatting are not technical issues that require a lot of skills or expertise. Essentially, they require a bit more time and discipline. Plus, make sure to think from the viewers’ point of view when you work on it. Make some efforts in your financial model if you would like to reduce any possible friction among parties involved.

7. Syntax Errors

Some mistakes may be the simplest things. It could be something as simple as confusing two formulas, which can produce unexpected errors. For example, you may confuse COUNT() with COUNTIF(). This would lead to counting all numeric values in a specific range instead of only the values that match particular criteria. However, this mistake would usually be rectified immediately while the model is being prepared, as the number of parameters required is different for the two functions. The spreadsheet software will complain right away, and the mistake will not be prolonged.

Here are some other common syntax errors made by entrepreneurs :

• Mixing up positive and negative digits in a cash flow statement.
• Misplacing or forgetting brackets. =A1+B1*360 does not equal =(A1+B1)*360.

A solution we can suggest is to use checks throughout the spreadsheet. That way, you can verify the calculations. Make sure to have all checks in a single tab to stay organized. Also, keep in mind that the balance sheet always needs to balance. That way, the sum of all assets should equal the total of all liabilities and equity.

8. Long formulas

Another mistake that startups make in their financial models is the use of long formulas. It would be best to avoid long formulas if you could. That way, you can minimize the complexity of your financial model and spend less time double-checking calculations. Make sure not to fall for another pretty common mistake by using nested if conditions. We know that it is necessary at times. Yet, remember that nested IFs tend to generate errors when used improperly, and also reduces the readability of your financial model.

Always keep your model simple. One thing you can try is to narrow the problem down as much as possible. You can do this by adding several columns to work on a formula that will either return multiple or a single value. It is better to do this only when the constituent collection of terms inside a certain formula have real meanings in the subject of interest.

9. Daisy Chains

A daisy chain is when data is taken from several sources even when they were available from a single input tab. Essentially, there are a series of links that are not directly connected to the original source. This is a mistake you should avoid. It certainly forces the reader to go through the spreadsheet multiple times just to figure out the logic. Plus, it also adds to the size of the file.

10. Naming Convention of Files

Like formatting, the naming convention you use to save files can be the difference between taking too much time in file explorer and showcasing the organization skills to the investors.

You must double-check to minimize the possibility of human error. Of course, this does require some discipline. You might name a model “Model 5” and eventually forget its purpose entirely. To avoid this mishap, make sure to be rather specific with naming your files. Although it may seem like additional work for a simple detail, it is totally worth it. All the extra time spent specifying your files reduces the chance of presenting an embarrassingly incorrect version in the future.

11. Incorrect sums

Another mistake that startups make in their financial model is also related to calculations. People tend to come up with incorrect sums by “double counting” values. Let us explain this with an example. A column might include the values of various assets with subtotals in the same column. So if you were to calculate the sum of the values, =SUM(C1:C7), the subtotals would be involved and double the sum.

So how can you prevent this mishap from happening? Well, you can use the SUBTOTAL function to add together each value that is not already subtotaled. =SUBTOTAL(C1:C7) would give you the correct sum.

Wrapping up

There you have it! You had the chance to learn about the mistakes that startups make in their financial models. Of course, creating a financial model is essential. It’s pretty easy to make mistakes. Even the simplest mistakes can break your business. Accuracy, transparency, and reliability are necessary for a financial model. Make sure not to make the mistakes we spoke about, including calculation errors. ‍ 

What exactly is financial modeling for startups? Well, it is the process of projecting and forecasting revenue, employees, customers, expenses, etc., for the future to understand and assess the viability and profitability of the business. As the startup is still in its infancy, this modeling will help them create their budget and business plan. It will help present the business plan to potential investors.

Through this post, we wish to explain: What is Financial Modeling for Startups? It’s important, and you can start implementing it in your own business.

Business decisions based on data 

You know that business decisions need to be driven by data. Usually, the best financial leaders analyze where their business needs to go and what is needed to be done to get there. We know that it is easier said than done, of course.

Startup businesses can have jagged growth patterns initially. That is not unusual. It happens due to their large influxes of external funding and development of unique products. It’s not always a simple thing to handle their cash flows and revenue growth over time.

Luckily, there are several powerful strategies you can use to help leverage your financial data. They are financial modeling, forecasting, and budgeting.

Financial Modeling

A financial model is a tool that entrepreneurs utilize to represent the entirety of a startup’s historical and future performance. Here, future performance is analyzed based on a set of assumptions. Transactional impacts are represented in numerous accounts. Therefore, it is possible to alter one and then see how that change impacts the other.  

Once you build the model, you can manipulate it using forecasting techniques. These techniques include forecasting and budgeting to provide insight into the growth of the business. Often, entrepreneurs use different office packages (Google Sheets, Microsoft Excel, LibreOffice, etc.) to construct financial models. Keep in mind that the most fundamental form of a financial model is the three-statement statement model. This includes an interconnected balance sheet, cash flow statement, and income statement.

Why is financial modeling for a startup important?

A Financial model can be a powerful tool for several reasons. There is one very important thing that stands out. That is, they enable your business to make effective financial decisions.

So, what if you go ahead without an in-depth financial model? If you do so, your startup’s ability to plan for the future could be incredibly limited. Businesses that make decisions without properly considering the impact they’ll have on their finances are at a huge risk. It is more likely that they run into cash flow issues. They would often spend too much money or in the wrong places.

Benefits of financial models

A financial model allows you to test several scenarios for the future, focus on the potential results, and come up with strategic decisions based on that information.

• It helps in understanding the revenue and cash flow forecast for the business.
• It helps in figuring out the business’s assumptions while creating the startup.
• Usually, investors carefully look through the financial model before deciding to invest in a business.
• It helps in understanding the profitability and viability of the startup.
• It helps in showcasing the real picture of your business to the external investor and debating the investment terms.
• It helps in quantifying the assumptions for the startup business.

Now that we know the importance of a financial model, we can move on to look at how you would build one for your startup.

Top – Down Approach

First up, we have the top-down approach. In the top-down approach, you start with macro factors and gradually work through the micro factors. Starting points are the industry standards, which essentially narrow down the goals the business can fit into. This particular approach assists with defining the forecast based on the market share you wish to acquire.

The TAM (total available market), SAM (serviceable available market), and SOM (serviceable obtainable market) models help in this type of approach. The TAM for the product is estimated as the first step in this model. After that, you have to figure out which part of the market you want to acquire, which is called the SAM. From that SAM, the current service base of the company is known as SOM based on the existing competition. So, in this model, you start out with the size of the industry and the market share you can capture.

Bottom – Up Approach 

The method that is used in the bottom-up analysis is fundamentally different. An individual stock’s characteristics and micro-attributes are the prime targets of the bottom-up method. Bottom-up investment focuses on the underlying strengths of individual companies or industries. This study looks to find lucrative openings by comparing the unique qualities of a firm with its market value.

Research for bottom-up investment starts at the company level but continues upstream. The fundamentals of the company are taken into consideration, and the industry and local economy are also taken into account. Therefore, the bottom-up investment might be quite broad throughout an entire sector or extremely narrow in finding crucial characteristics. 

How to Build a Financial Model

Here’s what you have to do to build a financial model:

• Compile your business’s previous financial statements.
• Calculate the annual trends and make your assumptions for future changes in revenue growth rate, gross profit margins, fixed costs, and variable costs.
• Use them to come up with future income statements from revenue down to earnings before interest, taxes, depreciation, and amortization (EBITDA).
• Start by building the balance sheet first with your prior balance sheet and adjusting it using your income statement activity.
• Prepare a supporting schedule for your capital assets, interest, and debt.
• Utilize that schedule to fill in interest on the income statement. Once that’s done, calculate your net income and taxes.
• Estimate your closing capital assets, debt, and equity balances using the schedules and net income for the year.
• Create a cash flow statement, working backward from your net income (adjusting for non-cash expenses).

Forecasting

Financial modeling and forecasting are essentially linked. That is why they tend to get confused with one another. However, the distinction is that the model is the tool. On the other hand, forecasting is its primary purpose.

Forecasting refers to the use of pivotal assumptions about the future and historical data to predict your startup’s future performance.

This may surprise you, but the key to creating the most effective forecast often lies more in assumptions of the model than anything else. That’s right. Remember that these assumptions can swing the projected results wildly. They have the potential to make or break the forecast. That is why you have to take forecasting seriously. As an entrepreneur, you need to be able to effectively forecast your business’s future. For that, you should have a deep understanding of your startup’s business model, your market, your competition, and all the other external factors that might affect your growth.

The Importance of Forecasting

Forecasting is the biggest reason that financial models are built. As you know, a financial model can provide a framework for understanding your business. However, they would not mean anything unless you used them to plan for the future. Forecasting effectively allows a startup to:

Time your decisions properly

As you know, startups need to hire employees, buy equipment, and pursue rounds of funding to grow their business effectively, but they have to time each of these very carefully. Going ahead without funding for too long, hiring employees too early, or purchasing expensive equipment at the wrong time might carry your company to bankruptcy. Forecasting allows you to predict when your startup will be ready for big investments and when it will need new funding, so you can prepare well.

Pivot quickly in bad scenarios

All startup businesses should be able to forecast good, average, and poor scenarios for the future. This helps them come up with plans for each of those. You can stop being blindsided by outcomes that are less than you hoped for and respond to them instantly by using forecasting to create a contingency plan ahead of time.

Optimize its resource allocation

Startups have limited labor hours and funds. That is why they have to utilize them both cautiously. This is where forecasting comes in handy. Forecasting allows you to figure out the most essential levers driving your company’s growth, so you get the chance to invest your resources where they matter most.

Budgeting

Budgeting is essentially a subset of forecasting that is very much focused on costs and other cash outflows. This is a common way of utilizing the three-statement model, although it depends more on the income statement than anything else.

You’ll need to create different budgets for your business at each stage of its growth. For instance, you will need to create a budget for the costs of getting your product or service ready for sale before you start bringing in any revenue. But when you bring in revenue, your operations will, of course, expand. Then you’ll have to refine your budget by considering these new expenses.

Why Budget?

So why should you budget? Well, budgeting is such an important element for a startup business at any stage. We cannot stress that enough. But it’s especially needed for businesses that are concerned with their cash flow. This can be during times of low revenues or thin margins.

Once your startup business evolves past such challenges, your budget becomes a more analytical tool. Monthly or quarterly meetings are common for effective finance teams to review actual expenditures vs. planned expenditures. Thus, they are able to identify problems within different areas and make necessary adjustments.

How to build a startup budget

Here’s what you have to do when building a startup budget:

1. Figure out your fixed costs

These will be hard to cut back on and include expenses such as payroll, rent, and insurance.

2. Estimate your variable costs

These will scale up with your sales and include expenses such as raw materials, shipping costs, and utilities.

3. Estimate your monthly revenue

Before anything, here is a heads-up: this step can be difficult. However, your revenues will be the benchmark against which to gauge your expenses.

4. Add in a healthy margin

Every business needs to have a buffer, just to be cautious.

• Figure out your expenses by dividing them into necessary and discretionary categories.
• Determine where you can make reductions in spending.
• Adjusting, however, is needed.
• Make sure to minimize discretionary costs to get your expenses under revenues with a healthy margin included.
• Compare your budgeted outcomes to your actual results as frequently as possible. It would be best if you did so every month.

Wrapping up

You had the opportunity to get knowledge about “What Is Financial Modeling for Startups?” You learned about types of financial modeling, forecasting, and budgeting as well. The information we presented will surely help you build your startup business. You will also benefit from reading our post: How to Boost Productivity of Your Startup.

As you know, public relations (PR) is such a popular concept. Who has not heard of it? It has been around for decades. On the other hand, content marketing is a relatively new term. PR and content marketing are two disciplines that may seem similar at first glance. In fact, they do have a lot of similarities. However, there are significant differences as well. So what are these differences? And most importantly, does your business need PR or content marketing, or both?

Through this article, let’s identify similarities and differences between the two concepts. By the end of this post, you will distinguish between PR and content marketing and what is suitable for your business. First, let’s figure out the definitions of two concepts.

Definitions: What is PR? 

So what exactly is PR? Well, according to the Public Relations Society of America, “PR is a strategic communication process that builds mutually beneficial relationships between organizations and the public.”

Definitions: What is content marketing? 

The Content Marketing Institute defines content marketing as “the marketing and business process for creating and distributing relevant and valuable content to attract, acquire, and engage a clearly defined and understood target audience with the objective of driving profitable customer action.”

Now, what can we understand from the two definitions of these concepts? The main point you can identify is the connection between PR and content marketing. You could say that content marketing is a subset of PR. Basically, PR is all about the overarching practice of conveying the right message to the target audience as effectively as possible. Likewise, content marketing is mainly a digital tactic that is mostly used by PR practitioners that focuses on creating and distributing content apart from traditional media channels. Simply put, content marketing mostly focuses on establishing and then using your own publishing channels. However, it can also utilize channels like social media platforms.

Differences and similarities in methods 

One of the main similarities between the methods used by content marketing and PR is that they both use writing, design, and communication media to convey a message. Each aims to cause the public to take the desired action, like purchasing a product or visiting a website. 

Let’s now look at some key PR tactics: 

1. Publicity

Maintaining coverage in the news (It could be in print, broadcast, online, or all of the above media). 

2. Damage control

Preparing for and responding to negative press coverage to effectively reduce or dismiss its negative consequences. 

3. Speaking opportunities

Checking for opportunities to speak, pitching a speaker, crafting the speech, and coordinating the engagement. This includes pitching news coverage of the speech and leveraging it through different media, such as social media platforms. 

4. Awards

Going after opportunities to win appropriate, reputation-enhancing awards and recognition. 

On the flip side, here are some tactics used in content marketing: 

1. Blogging

Writing blog posts that are keyword-focused to create an audience, convert prospects into clients, or to increase the loyalty of customers. 

2. Case studies

Showcasing real-world scenarios of a product or service in a specific, measurable, and engaging manner. 

3. Infographics

Coming up with visual-driven content to present concepts more interestingly and smoothly than is possible with just words. 

4. Podcasts

Making serialized audio content that showcases a compelling story surrounding a product or organization. 

The connection between PR and content marketing 

Going through all the explained points, you get to see the connection between PR and content marketing. Did you notice that most tactics classified under content marketing have been used by PR practitioners? But they are certainly content marketing in the fact that they involve making and distributing content apart from traditional media. 

Plus, you may have noticed that content marketing tends to be less concerned with relationships. However, it is quite the opposite. This discipline just has a slightly different approach to establishing relationships. In content marketing, meaningful relationships are created by offering quality content that answers important questions. It helps when it comes to creating a trusting relationship between the person asking questions and the one (or organization) answering them. 

The primary difference between content marketing and PR 

The main difference between PR and content marketing is that PR communicates messages to audiences that already exist. For example, readers of a magazine or members of an organization may hear a speech. On the other hand, content marketing builds its own target audience. Certainly, there are advantages to having an existing audience. One of the major benefits is that the message being conveyed is benefited from the authority and trustworthiness of an already established channel. Likewise, there is an advantage to creating an audience from scratch. The benefit of building an audience is that you “own” it. You can tap into it whenever you want, versus being obligated to gain the permission of someone, such as an editor, to do so.

PR and Content Marketing: Measuring Success 

We have now established that PR and content marketing use tactics that are different from each other. So because of that, we can assume the way they measure success also differs. And yes, the two realms view success differently. 

When it comes to PR, success is measured by factors, such as viewer impressions, the number of media placements, and the authority of the media outlet in which the stories are placed. Apart from that, actionable metrics are also taken into account. This includes the number of website visits or leads generated from digital news media, which, unlike print or broadcast media, allows you to track readers’ actions prompted by consuming the media. Usually, content marketers focus on the latter, measuring their success rate according to referral traffic, engagement metrics, and conversion rates, etc. 

PR and content marketing: what is suitable? 

Now here is the big question. Which is the right call for you? PR or content marketing? Well, the answer is a bit more complex than the question. It’s not one over the other. Usually, content marketing and PR work best when combined together. You can use traditional media to direct traffic to digital channels and vice versa. Combining PR and content marketing can incorporate the real world and the virtual world for higher effectiveness in both. 

So, how can you implement the two disciplines? Don’t worry. We will give you some tips on how you can combine PR and content marketing correctly to get the best outcomes. 

• Pitch your infographics to the news media. Since they are constantly seeking great art, you’d have a chance. 
• Repurpose bylined columns published in the news by turning them into blog posts, keeping in mind where each column was originally published. 
• Showcase award icons on your official website’s homepage. Write about your awards on your blog and put out press releases about your wins. 
• Use the topics of white papers and case studies as the topics of your speaking engagements, and provide printed copies of the content at the engagements. 
• Take news reports about your business and turn them into printed inserts in sales proposals.

Wrapping up 

There you have it! You’ve got to learn about PR and content marketing. Now you know the definitions, the similarities, and the differences between the two disciplines. You’ve also got to learn which of these is best for your business. The answer is not one over the other. Instead, combining the two can generate the best results. A solid marketing strategy is critical for the success of your business.

We know that you have big dreams for your startup. You want to see your business grow and achieve success. And for that to happen, your startup needs effective upliftment. There are several actions you can take to give your startup a boost. One of the most essential steps is press coverage. We prepared an advanced guide to PR that will help you understand how to get the right press coverage. With the help of this PR guide, you will be able to stand out and get more customers in your business’s development. 

You have to understand how the hottest startups right now are all over the media. How did it happen? Well, it is all thanks to the magic of PR. Of course, these brands offer great services—but that’s not the only thing that gets them the coverage. There can be startups with great services and potential that remain more or less unnoticed due to poor PR. So, with the right PR strategy, you can turn your startup into press-worthy news. That is going to be a huge step towards the success of your business. 

An Advanced Guide To PR 

You know that a good story has the power to move people and influence action. Yours needs to be compelling enough to create such a response. 

Now, how do you create your story? Well, there are some key components that you need to keep in mind when making your startup story worthy of media attention. 

1. Master the Art of PR Storytelling 

Your story for the media needs to be created around three basic elements. They are:

• Your products and services
• The purpose of your startup
• Your vision

If you use this framework, you can go through an exercise of company and customer discovery. This could assist you to illuminate the high-level, “big picture” points regarding your startup business: 

Your products and services 

Describe well what your service or product is and/or its purpose is and where its niche offering currently fits into the existing industry landscape. Remember that to truly define your product, you have to know how it’s different. That is why you should work on your competitive analysis at an early stage. 

The purpose of your startup

Figure out your business’s “reason for existing.” It basically means identifying the problem your product or service plans to solve. Plus, pinpoint who you are solving this problem for. You cannot forget about your target customer. So, make sure to have a clear understanding of who they are and what they care about. 

Your vision

Make sure to go with an exciting but authentic tone that encapsulates the overall vision of your startup. It’s also critical to remember that the vision should portray realistic goals as well. You can present your story and company as relatable to the customers. For that, try using real characters and events when crafting your story. Remember that honesty can never go wrong and it will establish trust. 

Once you figure out these factors, then you have passed a critical phase in your startup’s development by establishing how your product or service aligns with the actual needs of your audience. 

2. Get Journalists’ Attention 

Creating your story can help you clearly position your startup business. And you may see it as super exciting. Despite that, journalists might not find it interesting unless you offer them a reason to. So, how can you do that? Well, for that, you are going to have to think like a journalist. From their point of view, the story should be newsworthy. 

Let’s go through a few key elements of newsworthiness to keep in mind here: 

Newness

As you can guess, the news is “all about new” information. You can think about how your business can contribute to cutting-edge discussions in your field. 

Relevance

Be up-to-date with the most recent articles by journalists in your field. You can do an in-depth analysis of the most trending posts. See how you can tie them to your story as well. 

Uniqueness

Think about how your angle or approach is unique. What is your x-factor? What are you bringing to the entirely new table? If you’re saying the same thing as everyone else, you’re not making a very strong case for why you should be heard in the crowd. 

Of course, it can be hard to acknowledge that your product might not be inherently interesting to everyone. However, it’s absolutely essential to develop a strong filter for what’s newsworthy to get coverage. 

3. Figure Out the Correct Angle: Tailor Your Story to Each Journalist 

Suppose you have created a genuine story that is newsworthy. If so, that’s awesome. It is already a huge step forward. The next task is to personalize that crafted story according to each journalist you want to reach out to. 

Remember that it is going to be highly subjective. So, it’s so important to establish your target journalists well beforehand. Be sure to do enough research to understand how to find the correct angle. So, how to nail down your targets and tailor your story? 

Choose the Right Journalists

Shortlist 3-5 journalists you want to reach out to. Narrowing them down according to relevant industry, topic, and publication. At first glance, you may feel like shortlisting can reduce many options. But that’s a good thing. With this method, you know exactly who you should reach out to. 

Try out smaller publications that cover the relevant niche. It may not be deemed ideal. However, you’ll have a better chance to get traction if you concentrate on similar interests rather than trying to get the biggest media outlet. Your focus should be on where your main audience is—that’s how you get the best engagement. 

Research your targets

By subscribing to your target journalists’ social feeds, you will begin to get a sense of their vision, sense of humor, and what they’re passionate about. That way, you get the chance to tailor your story according to their interests and present it to them in a way that feels more relatable. 

Establish Your Newsworthy Hook

For your story to earn the attention of a journalist, you need to ensure that you can build a reason for them to care. Use as much research as you have at your disposal to come up with your hook. 

You can come up with a way to relate your story to topics that the journalists of your choice are interested in. Do your homework on the topics they cover the most and their most popular posts. 

It would be best to avoid cold calls. They can annoy journalists and hurt your chances. Instead, you will most likely go on their blacklist. Suppose you put in the work upfront to personalize your outreach. That’s a better move because then you’re more likely to get a positive response in return. 

Focus on ‘Human Relations’ for Long-Term Success 

Remember that journalists play a key role here. So, make sure you target the right journalists. However, what if you’re not developing any kind of bond with these journalists? In that case, you’re reaching out to them as a stranger. Then you become just one of many in the crowd who reach out to them. But let’s say you’ve built a good rapport with these journalists. Then it would be so much easier to send your story to them. 

A good bond can make a huge difference to your PR efforts. But don’t misread the advice. We are not suggesting that you just go out and start pestering journalists with the hope that they’ll turn into “useful contacts.” What you can do is take a proactive approach to building connections.

It is important to make friends before you need them

Maybe you’re wondering how to reach out to journalists and industry experts. How do you do so politely without sounding forced or self-serving? You can look for natural opportunities to talk about topics that you are interested in, where you can add value. You can do so by: 

• Joining relevant groups 
• Participating in social media discussions 
• Replying to publications and group forums 
• Asking a mutual friend to introduce you 
• Sharing interesting work on your networks 
• Attending industry events 

Make sure not to post anything related to promotional content at this stage when you’re engaged in such discussions. It is better to focus entirely on offering industry expertise and knowledge. 

Connecting with a Journalist: Key Tactics to Follow 

Suppose you’ve now started building connections and providing contributions to your field. Now is a good time to start reaching out to your target journalists. Some key tactics will significantly increase your chances of getting traction: 

Get their permission

Make sure you seek permission before pitching. It’s better not to assume that a journalist will automatically want to listen to the story. Besides, you’re more likely to get a “yes” if you ask. Keep it short but personal. It would be best to use a customized and personalized approach. That way, you get to speak to their professional interests. It is more valuable. 

Come up with a good headline

Suppose you can get the journalists to click on the headline. That in itself is a huge step. That means you have a better chance of getting a read on your first line of copy. 

It is important to let the facts do the talking. You can use stats and case studies to show the impact of your business. 

Be prepared

You don’t have to wait until you get a “yes” to compile the supporting factors that backup your story. Don’t wait until the last minute to gather all the pieces and end up wasting the journalist’s time. Prepare your media kit before sending your pitch. 

So, what if you get a “no” as an answer? Well, it is important that you do not get discouraged. Instead, treat a ‘no’ like a future “yes.” When you get a no, take this chance to learn why. Ask for their feedback and any suggestions. It isn’t over for you yet. So for now, thank journalists for their time until next time.

Beyond the Scope of Media Relations: Ways to Advance Your Public Relations Strategy

Creating media relations and getting the right press coverage is very important for getting brand exposure since earned media from trusted journalists carries a lot of weight in the eyes of your potential buyers. 

As you know, it’s not easy to not take an all-inclusive approach on PR to evolve your strategy. Consider the following facts for starting up:: 

Create Valuable and Consistent Content

Note that your brand story can be enhanced through each piece of content you create. A consistent story across many digital platforms improves your credibility. Many influential brands have become pros at publishing this way. You could create everything from social content to e-books, blogs, infographics, videos, and events. This way, you can bring the news to your target audience.

Share Your Expertise on Non-Branded Outlets

A great way of building credibility is to contribute content on industry topics to media outlets. You can do so with a guest post, an opinion piece on some other company’s blog, or a podcast. By sharing your expertise on non-branded outlets, you get the chance to get third-party endorsements, build connections within your industry, and connect with your audience in new ways.

Leverage Your Social Outlets 

Social media can provide you with a huge chance to connect with niche communities in different ways. You can use these social outlets as a mutually reinforcing tool for your public relations efforts. 

You can, of course, create discussions on mainstream social media outlets such as Facebook, Twitter, LinkedIn, etc. Other than that, consider capitalizing on social bookmarking sites like Inbound.org, StumbleUpon, Reddit, and Quibb. They provide a perfect way for startup businesses to stay plugged in, participate in discussions, and amplify the reach of PR placements. Keep in mind, it’s essential to engage daily as the majority of the content from major publications gets chosen organically. Keep your focus only on the most relevant outlets and dive into those communities. 

Consistent Presence: How to Map Out Your PR Calendar 

Your presence must be consistent. In other words, you have to be online as much as possible. So, how can you maintain a constant presence and remain top-of-mind for your customers? Well, it is not that much of a challenge with proper planning. That way, you can make sure that there’s a piece of news about your startup business at all times. Here are the steps to follow:

Step 1

Brainstorm ideas List down ideas for the most newsworthy elements of your startup’s product or service. Remember that your team’s input is important here. Each department will have important insight into how to solve the needs of customers. So, get feedback from every single member of your team. 

Step 2

Focus on emerging themes. Narrow down the emerging themes from your brainstorming session and figure out how they will connect with your clientele. 

Step 3

Map the themes onto the calendar: Map out your themes on a calendar with one campaign every 4-6 weeks. 

Step 4

Come up with relevant campaigns: Think about how content and social outreach can aid your PR outreach effort during each campaign cycle. Figure out the kind of content that would be the best fit for each campaign. Then create the content according to that. 

Step 5

Invest in relationships: Start by understanding your target journalists well before your pitch. With advanced planning, you will be able to constantly be one step ahead of your outreach. 

Step 6

Your team must be fully aware of what’s going on. Your team members should know the campaign cycles and be ready to participate, share, and interact with customers during these fast-paced periods. 

Step 7

Plan for downtime: Don’t neglect the in-between times to create and publish good content. You should aim for content that will have a big impact, keeping in mind that less is more. Try out collaborating with brands boasting bigger networks to make joint content. Also, remember to keep the content consistent with the overarching PR themes. 

Step 8

Test and evaluate again. Analyze the value of every media placement. Check again if any issues should be fixed. Hold meetings from time to time to track your progress. You must learn from any mistakes and refocus on maximizing your PR efforts. 

Wrapping up

There you have it! We have prepared for you a user-friendly, advanced guide to startup PR. As you know, your startup needs PR to reach the success level you want. It can boost your business and help establish your business in the market. 

It’s really useful if you take a proactive approach. By following strategic planning and execution, you will be able to take your startup down a more successful and productive path. You will also benefit from reading our post on the difference between PR and marketing. 

Sometimes, certain terms can confuse you. Many people get confused by PR and marketing. You might think they mean the same, but it turns out, they refer to different things. Confusing public relations and marketing is quite a common mistake made by many. After all, they have a lot in common. So it’s no surprise that the two disciplines cause confusion. But they do have their differences. Learning the difference between PR and content marketing is essential. This knowledge comes in handy when communicating effectively within the organization. Plus, it is also necessary when it comes to customer engagement strategies. 

Through this article, we plan on letting you know about PR and content marketing. You will get to know the meanings of each term and the differences and similarities between them. So, to learn it all, just keep scrolling. 

What Is Public Relations? 

First of all, let’s figure out what PR means. PR, a.k.a “Public relations” refers to a strategic communication process that builds mutually beneficial relationships between organizations and their public. 

In public relations, public image is the main idea, and positivity is at the core of the notion. There are professional public relations officers, employed in-house or under the direction of a client. Their job is to portray an organization, brand, individual, campaign, or product in a positive light to the public. 

Let’s take an example here. Suppose a company decides to improve the publicity. They would have a public relations team to come up with a messaging campaign to communicate their intentions to the public. In this case, the PR team would start out by drafting a “story” surrounding the entire business idea.. This involves elevating the profile of the organization’s founder or executive team, while drafting press materials and fielding media inquiries regarding the transition from private to public. The message will be shared in press releases, on social media, or face-to-face with journalists. The message would highlight the successes of the company and why it’s a good move for everyone involved. 

Let’s look at some of the most common functions of public relations:

• Corporate Communications 
• Crisis Communications 
• Executive Communications 
• Internal Communications 
• Investor Relations Communications: 
• Marketing Communications 
• Integrated Marketing/Integrated Marketing Communications 
• Media Relations 
• Content Creation 
• Events 
• Social Media 
• Multimedia 
• Reputation Management 
• Speechwriting
• Brand Journalism
• Handling Negative Press 

We discussed that the main idea of PR is to showcase a brand in a positive light to the public. This also involves handling the negative press. They have to deal with any negative news stories by coming up with plans to control the damage. Damage control is a huge part of PR and one of the toughest as well. Suppose a negative story comes up that impacts a client. Then, a public relations professional or agency must take a very delicate and cautious approach to dissolve the situation and reduce or reverse the damage. They would attempt to put a “positive spin” on things or communicate an apology on behalf of the brand. 

What Is Marketing?

Now, let’s see what exactly is referred to as “marketing. Marketing can be identified as a set of activities, set of institutions, and processes for exploring, creating, communicating, delivering, and exchanging offerings that include value for consumers, partners, clients, and the overall society. Of course, marketing is essential to brand-building, just like public relations. It is crucial to the survival and growth of any business. 

There are different types of marketing and marketing strategies. We have mentioned some of the most well-known marketing strategies below:

• Content marketing 
• Inbound marketing 
• Search engine marketing 
• Email marketing 
• Social media marketing 
• Relationship marketing 
• Viral marketing 
• Influencer marketing 
• Guerilla marketing 

So, what is the purpose of marketing? Why is it an important element? Well, that is because marketing serves so much. It is crucial to form a connection between a brand and its audience of clients. Customers are introduced to the value of the brand (it could be a product, company, etc.). Then, a bond is created with the intent of influencing the customer’s behavior. You might think of that as converting the client into a loyal consumer and brand advocate. However, it’s not just that. It doesn’t necessarily have to be about the sale of a physical product. Attitudes towards a brand can also be transformed through marketing. In turn, someone can become an advocate of the brand without ever actually buying products. 

Similarities Between Public Relations and Marketing 

We have established that PR and marketing are two different entities. Still, there are a bunch of similarities between the two. 

1. Storytellers 

One of the biggest similarities between the tasks of public relations and marketing professionals is that most of the time, marketing and PR officers describe themselves as storytellers. That is because both of these jobs require them to tell the story of an individual, brand, product, or idea. So, the approach taken by PR professionals and marketing professionals is pretty similar. Other than that, there are more similarities.

2. The nature of work  

Another similarity is regarding the actual nature of the work of marketing and PR officials. Both PR and marketing are focused on spreading the word and creating awareness. Although the two entities have different target audiences, spreading awareness is a common task for both. 

3. Tools of the Trade 

This point is pretty obvious. The medium and tools of distribution used by PR and marketing officials are similar. For example, both utilize distribution channels like social media to achieve their specific end goals. 

4. Content Creation 

Now you know that both PR and marketing professionals are storytellers in their own way. As storytellers, both jobs require them to have incredible content creation skills. This is a crucial skill because both need to act as the “voice” of the business. 

5. Relationship Building 

Both the PR and marketing disciplines have a common aim. That is to build a good relationship with a target audience. Professional PR officers work to build positive relationships with the press covering their customers. Equivalently, market professionals want to create a similar connection with consumers. 

Now you know the similarities between the PR and marketing disciplines. They really have a lot in common. That is why setting marketing and PR apart can be a challenge. However, it’s not all the same. There are some noticeable differences between PR and marketing. Let’s see how they differ from each other. 

PR and content marketing: The differences 

1. The idea of selling vs. promotion 

The primary difference between PR and content marketing is the idea of “selling vs. promotion.” On the surface, marketing is about selling, while PR is about promotion. However, that’s not the only difference between marketing and PR. 

You could say that, ultimately, public relations is a subcategory of marketing. That is because marketing covers a large range of processes that aim at promoting organizations to the public. Although the goals of marketing and PR are promotional, there are key differences between the fields. 

Marketing is a set of activities, a set of institutions, and processes for creating, communicating, and exchanging offerings that have value for consumers, partners, and society overall. Basically, marketing is all about preparing to deliver products or services to the public, letting people know what you’re giving, and getting it to them. 

On the flip side, public relations has a more specific angle. That is to portray a positive outlook on a brand. The main idea behind public relations is to influence, engage, and form bonds with key stakeholders across numerous platforms. This is done to shape and frame the public perception of the particular brand. 

2. Measurement of success

PR and marketing professionals tend to measure success using different metrics. For example, in marketing, they measure growth using sales figures. On the other hand, PR will check the success rate by checking the number of people who are receiving and responding positively to their messages. 

3. Target Audiences

Both public relations and marketing officers work to generate positive impressions of their clients. However, they have a separate set of target audiences. For instance, marketers will employ meticulous research strategies to identify their target consumers. 

Wrapping up

There you go! Now you have learned all about the differences between PR and content marketing. We hope this article helped you understand each of these entities well. Also, now you can understand the similarities and differences between the two disciplines. They have a lot of similarities, which is why a lot of people confuse the two. However, the many differences in the approach and purpose establish that PR and marketing are quite different. Learning the differences and similarities can help you understand the nature of the two. It can also help to communicate effectively within an organization and with the public.

Startups come with a ton of challenges. It is difficult to make it in the startup world. Entrepreneurs struggle a lot to achieve the success they dream of. However, it can go terribly wrong for some businesses. In fact, a lot of startups don’t do well. We are certain that you have already heard the cautionary tales of startup businesses that have failed. So naturally, you may assume that there’s no hope for such businesses. No investor would be interested in a company that is failing or bound to fail. Well, that’s not entirely true. Investors keep funding these companies despite the high rate of failure. So, why do investors invest in unprofitable startups? What’s in it for them? People assume that the profitability of businesses. Well, investors have their reasons to do so. And surprisingly, they make sense. Let’s talk all about it in this post.

Why do investors invest in unprofitable startups?

So, why do investors invest in unprofitable businesses? What’s in it for them?

According to a recent research study, a lot of investors are willing to invest in startup businesses with little to no profits. The reason? Well, they do so because they hope that they will be successful in the long run. The study surveyed 2,000 venture capitalists and revealed anonymously their interesting investment strategies.

The research found that a lot of venture capitalists (46% to be exact) have funded startups with no profits before taking a chance on an innovative idea or business. Among the 1,500 people who were interviewed, most claimed that they had invested in at least one startup business with zero profitability. 59% of venture capitalists revealed that they did so because they believed these ventures could become profitable in the long run. 

So, what can we understand from this? The main point is that the initial profit-making ability is not the key. Investors start funding even before a startup business is profitable when they notice it has the potential to grow. And it’s a decision that will benefit them in the long run. Although investing in new companies can be risky, the rewards are potentially big. Now let’s see more specific reasons why investors invest in unprofitable startups.

Here’s Why Investors Invest In Loss Making Startups

1. “Unprofitable” means promising?

According to investor logic and experience, going for profitability too early usually means limiting growth. An extensive customer base needs to be created, and market research needs to be conducted as well. In certain exceptional circumstances, if the business is exhibiting greater profit in the beginning, something could not be right. 

Investors don’t walk away immediately when a company is losing. They carefully consider the future of the business before making any decision. A lot of investors don’t find alternatives like mutual funds and savings accounts lucrative and switch to other options with higher return opportunities. They notice that these startups have the potential for the future, despite the fact that they are not making any profits right now. The promise of future growth attracts investors to fund businesses that are at a loss.

2. Unprofitable businesses can still make money

Investors can still make money from unprofitable companies. VCs frequently sell their stakes and often go ahead with mergers and acquisitions.

3. The brand’s value

Another very good reason why investors invest in unprofitable businesses is the brand value of the business. Some of the biggest examples are Paytm and Zomato. These loss-making companies managed to raise funds only because of their brand value. Uber is also another example. As of recently, Uber has not made much profit. However, suppose a venture capitalist still invests in Uber. By doing so, the investor gets the chance to benefit from it. How? Well, because of the well-known name of the brand. Usually, startups market themselves in specific ways. They can also become relatively more popular than conventional businesses. Most of the time, investors tend to be interested in brands that are making no profits but still raising money. In that case, they bet their money on that brand value.

4. Besides Financial Gain, There May Be Other Motives

When investing, profit is often one of the last things that investors think about. However, most VCs choose startups based on the industry they specialize in rather than the startups themselves. For example, a healthcare-focused investment company may seek market dominance by investing heavily in as many healthcare-related companies as they can. This reduces the amount of money and time their rivals can make from the market. This strategy has the potential to raise the value of their portfolios, which is typically more significant to investors than financial gain.

5. Recovering money 

A lot of investors invest in unprofitable startup businesses because they can recover their money even if some loss-making startups blow up. Short-term dividends are one way in which shareholders (owners) might be compensated for their investment in a business. The stock price may also rise owing to increasing demand, and all signs point to investors being motivated to buy shares in this kind of situation.

In the hopes that it would someday turn a profit, some investors may be ready to purchase shares in a firm that is currently losing money. Since they are ready to invest when others are not, these investors—often referred to as “value investors”—have the perception that the business has untapped potential. Investors see it more like gambling intended to back up the net investment gains.

6. The startup’s vision and mission

Some investors focus more on the vision and mission of a business than on the profitability aspect. They invest because they believe in the mission and vision of a startup, despite its making profits. For example, many investors are interested in investing in tech startups. Most startups, particularly tech startups, use innovation as the main foundation to drive success.

So, suppose investors resonate with the business idea and see potential opportunities. Then they do not hesitate to invest their money in the new startup business.

Wrapping Up

There you go! We talked all about why investors invest in unprofitable startups. At first, it may seem confusing as to why they would do so. But, there are quite a few reasons. Now that you have read them, you can understand that their decisions actually do make sense. It is not always the initially profitable nature of the business that attracts investors. There is more to it. Investors understand that although a company is in losses right now, investing in it can benefit them. So, if you are raising funds for your startup, this is good news for you.

How to invest in NFTs? Non-fungible tokens, a.k.a. NFTs, can be defined as unique cryptographic assets that could represent either digital or other forms of assets. Basically, NFTs digitally symbolize ownership. The most well-known examples are avatars and collectibles. However, non-fungible tokens can symbolize ownership of almost anything.

Do you want to know how to purchase NFTs? Or maybe any potential risks of investing in them? Most of all, do you wonder if NFTs are the right call for you? And if it is, then how do you get started? You can find answers to all these questions and more if you scroll through this post. 

Everything You Need to Know Before You Invest in NFTs

First of all, we have to establish the following fact. Just because you are investing in NFTs does not mean you have earned a one-way ticket to being rich. Sure, some lucky NFT investors have experienced unimaginably good returns. But, you have to know that it is not the case for everyone. Everyone’s experience is different. There’s no guarantee that your specific digital asset will make you money. It may or may not happen or keep its value. Before you sign up, you have to understand that there is a chance that NFT could drastically drop out its original value. 

Remember that you have to be knowledgeable about cryptocurrencies and computers to invest in NFTs. At least some basic understanding is essential to managing your digital assets well. Otherwise, you are at risk of losing access to NFTs.

How to Invest in NFTs: step-by-step process

Step 1: Create a compatible cryptocurrency wallet

Let’s kickstart with getting a cryptocurrency wallet. If you already have one, you can simply skip this step. If you don’t, you have to create a wallet, as it holds the cryptocurrency that you require to buy the NFT. Also, remember that not all digital wallets sync well with every cryptocurrency. So make sure you have a digital wallet that is compatible with the cryptocurrency needed to buy the NFT you chose.

Some of the biggest NFT marketplaces use ETH, a.k.a. Ethereum’s cryptocurrency. Considering that, it would be best to establish a wallet compatible with Ether. Creating a digital wallet is pretty simple. All you need is a computer or a phone, and you can simply create a digital wallet for free. Coinbase Wallet, MetaMask, and Ledger are wallets with support for NFTs.

Step 2: Select the NFT that you want to purchase

The second step is a fun step, which is shopping for the NFT that you wish to purchase. You will come across collections or sets of creative and unique NFTs. Take your time exploring the marketplace. Choose the NFT wisely to start off your collection. 

We can recommend some of the major NFT marketplaces to shop at. They include Rarible, OpenSea, or Axie Marketplace. Note that most NFT marketplaces offer NFTs only with cryptocurrency. Therefore, make sure to take note of the cryptocurrency that you need to purchase your non-fungible token.

Step 3: Pay for your digital wallet

Next, you can fund your digital wallet with fiat money to buy the cryptocurrency that you need for the NFT. For example, you can use US dollars here. As we mentioned earlier, the biggest NFT marketplaces use Ethereum the most. However, maybe the specific NFT that you chose is only offered in a different digital currency than Ethereum. 

Remember that most of the time, the allowed currency for an NFT purchase is the cryptocurrency corresponding to the blockchain of the NFT. For example, if the blockchain of NFT is Ethereum, then the allowed cryptocurrency can most probably be Ether.

Step 4: Connect your wallet to a reputable NFT marketplace

At this point, your digital wallet is created and funded. So, you are ready to connect your crypto wallet to the digital marketplace listing the NFT. When you connect it, you will be able to see your wallet’s cryptocurrency balance that is available for buying NFTs.

Step 5: Own an NFT

Now you are ready to purchase NFTs. All you have to do is click the “buy” button. You will notice that NFTs can have a fixed price. Or else, sometimes you may have to bid for it against the highest bidder to purchase it.

Suppose you chose ETH for the transaction. Then, you will need to make a “gas” payment to the Ethereum network for the transaction to process. Usually, this fee can vary according to the network congestion on the Ethereum platform. Sometimes, it may rise to hundreds of U.S. dollars. To estimate the potential gas fee, you can get assistance from websites like Gas Station.

Step 6: Confirm the NFT transfer to your digital wallet

Now that you have clocked the “Buy” button, you officially own an NFT. Keep in mind that once you click “buy”, there is no going back. You cannot cancel or reverse blockchain transactions. The NFT is yours to keep until you sell it.

You will have to wait a while, until the transaction processes. Then you will see the NFT in your digital wallet. Note that the blockchain network that supports the specific NFT needs to confirm and verify the transfer of the NFT to your digital wallet for it to complete.

Once the transaction is complete, you will be able to see the NFT in your digital wallet.

Understand the Risks of Investing in NFTs

Note that, as a new asset class, NFTs should be considered risky. One of the major risks is that it is associated with investing in cryptocurrencies. Sure, cryptocurrency is not a new concept. It has been here for over a decade. On the other hand, digital money is still a relatively new investment option with high volatility. The cryptocurrency value could decrease with no prior warning. It could happen due to difficult market conditions or government decisions.  

Let us explain this to you with an example. Suppose your NFT is priced in Ethereum. Due to unfortunate circumstances, the value of Ethereum dropped by 50%. As a result, the value of your NFT could also drop by 50%, or sometimes even more. Basically, there is a chance of effectively losing your whole investment in NFTs or cryptocurrencies.

The Advantages and Disadvantages of Investing in NFTs

Advantages

• You get to be involved in cryptocurrency and blockchain technology.
• The investments are anonymous and generally safe.

Disadvantages

• Depending on the investment, you are at risk of potentially large financial losses.
• You are required to manage a digital wallet.
• Gas Fees can be expensive.

Advantages explanation

You get to be involved in cryptocurrency and blockchain technology

When you invest in NFTs, you automatically gain exposure to a relatively new asset class and technology.

The investments are anonymous and generally safe

You have the chance to purchase NFTs securely and keep them safe in a securedigital wallet of your choice.

Disadvantages explanation

You are at risk of potentially large financial losses

Cryptocurrencies and NFTs are high-risk and volatile investments. You have the possibility of losing all the money you invested in an NFT.

You are required to manage a digital wallet

Maintaining a digital wallet requires you to have at least some IT skills and a basic understanding of the process. You need the knowledge to maintain the digital wallet to buy, store, and sell NFTs. If you are not up to learning these new skills, then you might find the process challenging.

Gas fees can be expensive

As we mentioned earlier, you may have to pay over a hundred dollars as Ethereum gas fees to procure an NFT. Keep in mind that this amount is in addition to the transaction value.

How to Start Investing in NFTs: Beginner-friendly Steps

Are you a first-time investor and new to cryptocurrency and NFTs? If so, we listed some beginner-friendly steps for you to follow when investing.

Establish a Digital Asset Wallet

You require a standalone digital wallet to hold NFTs, preferably one that is compatible with Ethereum. You can choose your crypto wallet to be either a hardware device that you physically keep or software that you downloaded.

Hardware wallets are relatively safer, while software wallets are the most convenient option.

Choosing The Right NFTs To Buy

Explore NFT marketplaces online to find the NFT that you want to purchase. You can look through a variety of short videos, images, and creative artwork to find the right one. Usually, NFTs are available in sets or collections. The price of a single NFT could be free or thousands of dollars per unit. Make sure to choose one that you like and that also has a bigger chance of gaining value (this might not possibly be done by the investor himself and he might need consultancy.)

Complete Your First Ever Transaction

You first need to connect your digital wallet to the marketplace where the NFT is listed before you can officially own an NFT. It is required to open an account with the NFT exchange (which is the marketplace) before initiating the transaction.

You will find that most NFT marketplaces work like auction sites such as the auctions on eBay. You may have to wait a couple of minutes or a few hours for the NFT transaction to finalize. 

What to Know After You Invest in NFTs

You can choose to keep purchasing and selling NFTs back to back. This option is best if you want to make a short-term profit. On the other hand, you can choose to buy, store, and keep collecting NFTs for the long term.

You are allowed to make the call about your investment approach. It is entirely up to you. However, remember to keep a close eye on your NFTs. Also, remember that both selling and purchasing NFTs can cause a capital gain tax liability.

Make sure to keep track of your cryptocurrency and NFT capital gains. You will also have to record and report the gains on your tax return each year. NFT taxation can be confusing because they can be considered collectibles. As a result, you could be subjected to a larger capital gains tax rate of 28%.

Treinetic’s Final Words: Should You Invest in NFTs?

Now for the big question: Should You Invest in NFTs? Well, NFTs are undeniably a potentially profitable investment. But is it right for you? Suppose you are looking for an investment plan that is non-volatile and stable. Or maybe you are not technically inclined. In such cases, NFTs might not be able to serve you well.

If you wish to get into NFTs, you should be knowledgeable and comfortable with the process. Consider the risks and your skills to manage a digital wallet. Weigh the advantages and disadvantages carefully before deciding to invest in NFTs.

Do you want to make your own 3D NFTs but need some help from a pro? Get in touch with the 3D experts at Metafylabs, who are also experts in blockchain technologies related to digital arts.