There are plenty of costs involved when starting a business (hiring people, office rental, energy costs, etc.) with the average start-up cost coming in at around $30,000. On the flip-side, micro-businesses can be kick-started at approximately $3,000 or less.
While many initial costs are necessary, it’s fair to say that many are, in fact, a wasteful investment. And, given that cash flow and investment is all-important at the early startup stage, it makes sense for new businesses to avoid unnecessary expenses and eliminate them entirely.
At first glance some of these costs may appear to be minimal, when you add them all up, you could arrive at a significant amount of money. Which, of course, could be much better invested elsewhere, and provide you with a stronger foundation for success.
Here are four things to consider that can help you reduce any unnecessary costs of starting a business.
Ultimately, as your business grows you’ll have to consider taking on people (employees) to give you a helping hand — just be strategic and selective with the personalities you hire. Your startup should be looking for very specific types of individuals in its early stages.
You need employees with multiple skill sets and the ability to help you out with various tasks in a variety of areas (maybe social media and sales generation).
Naturally as you begin to make more money, you can hire people for specific roles and define the role of existing employees. But in the early stages, flexible people are key.
Don’t rent an office straight away
Room rental and rates will cost you money you can’t afford as a startup. It makes no sense to spend all that cash on an office when there are so many other options to consider.
For example, the go-to is working from a home office to save on rent altogether. Or you might visit The Hoxton Mix or a similar co-working space in your area to rent a cheap desk — or just use as a virtual address. Coffee franchises like Starbucks, have become quite popular as daily work areas for “solopreneurs”. I written a few articles for Virgin.com from there.
And there maybe other small businesses in your area who would be willing to rent out a single desk for you to work on your business, for a much lower market rate than you would find anywhere else.
Watch your energy usage
Wherever your business is, make sure that you are keeping on top of your energy bills. Even the simple act of turning off a light when you leave a room can help you save a significant sum of money over your first year.
And if you apply the same efficiency principles to every other electrical device, you will find those savings start to multiply by a huge amount.
Trade in your expensive analog phone line and use smartphone or laptop with services like Skype and Google Hangouts instead. With more people getting used to contacting businesses online, phone lines are an unnecessary initial cost.
It’s also important to factor in your energy usage into your quotation and invoice, particularly if you’re providing a service like web design, application development, graphic design, interior design, writing, editing, and just anything else that requires you using software to create a product. This will help you recoup some of the costs.
Paying and being paid
A final point — never forget the importance of cash flow to your business. You always want to be cash flow positive. It will save you from significant debt over your first couple of years.
Running a successful business is tricky. There are plenty of pitfalls that you could fall into if you’re not careful and that’s why ninety-seven percent of new businesses fail. For your business to be a success, you need to find a group of customers who are willing and able to buy your product. They could be a group of the general public, or they might be business owners if you are on a B2B model. But that’s not all; you also need to keep your business cost effective and productive. You can’t overspend, and you need to make sure that what you’re providing is of high quality. As you might have guessed, this means that your business needs to be efficient. You need to run it in a way where all costs are accounted for.
Now, for a multi-million dollar business, all of these issues don’t fall onto the shoulders of the business owner. They can delegate certain issues onto other people. They might also be able to afford to hire consultants and experts to help them with the most difficult tasks. If there’s a problem with marketing, they’ll hire a marketing consultant. In just a few days, a promotion will be back on track, aimed directly at the target customer.
This isn’t the case as a solopreneur. If you are working as an individual in your business, all these issues are your responsibility. You have to make sure you find your target customer. You have to guarantee they are willing to buy your product and able to make the purchase. You have to keep costs under control, and you have to keep the company functioning efficiently. If you think this is a challenge, you are right. The three percent of startup business owners that make their company a success do this every day and much more. The question you need to ask is how can you follow in their footsteps.
Make It Personal
If you are a solopreneur, you have a fantastic opportunity. There are plenty of businesses on the market these days that forget relationships are important. They automate customer services to the point where consumers never interact with employees. Instead, everything is just another process, catapulting them to the next level of the sale. In your business, you want to create something more than this. You want to make a connection with your customers and you can. We suggest that you start getting active on social media, building up your profiles. Forget about creating new content because you won’t have time for that. Instead, just send out short messages through Twitter and Facebook whenever you have time. If customers are talking to you, make sure you respond. Do this, and you will have no issues at all guaranteeing that customers are willing to buy. You will have established a connection with them. You might even have gained their loyalty.
Of course, there is another piece of the puzzle here. They have to trust you and respect you as a potential business to make purchases from. If you are running a company solo, no doubt you are working online. You will be selling your product through e-commerce software, attracting customers through your website. As such, it’s your website that you need to focus on. It needs to be easy for customers to use, simple to navigate and it has to look professional. If you don’t tick off these boxes, they’ll go on and click off. The best way to do this is to hire a professional web designer. As a solo business owner, you will have limited funds. But this is a valuable purchase.
There is one more thing that you need to guarantee for your customers. They have to be able to buy your product. This means that they have to be able to afford it. The product must be priced at market value, and that’s another challenge. To do this, you need to be able to control costs.
There are a lot of simple ways that the average solopreneur can save money. Our first suggestion is that you do run your company from home. There is no reason for a solo business owner to have an office. It has no purpose or function in this business model. The main reason for an office is a collected area where people can work. If you are just one individual, you don’t need that. You might think it’s necessary to have a place where you can meet clients. But it isn’t because you can contact them over the phone and online. They don’t have to meet you face to face, and most won’t want to. They’ll be quite happy to arrange deals through online conferencing. Even if you are running your company, B2B.
Secondly, you need to monitor your costs. Accounting experts believe that money is wasted in smaller businesses because costs aren’t monitored. Instead, small business owners spend money as they would in their personal lives. They occasionally check spending, but they don’t keep accurate reports. You need to make sure you’re on top of spending completely. You can do this yourself by keeping accurate records on Excel spreadsheets. If you don’t know how to do this, use a service like MS Excel Learning Resources. There, you will be able to learn the basic and more advanced functions of Excel. You’ll be able to run your accounts and monitor spending on there yourself.
If you don’t have time for this, you can outsource the issue to an accountant. Or, use professional online accounting software. The only problem with this is that it’s an extra cost for your company that you might not be able to afford. It’s better to learn how to monitor spending yourself, rather than have someone do it for you.
The biggest cost for a solopreneur will almost certainly be marketing. Marketing and promotion will ensure that your business prospects stay healthy. You don’t want to end up in a position where customers forget that your business exists. This could happen without a constant push in a promotion, and that costs money. Due to this, you have to approach marketing carefully and ensure that you are making the right decisions.
You will need to hire a marketing agency to promote your business. Marketing is a 24/7 job that you won’t have time for. It’s important that you research the industry and find the agency that can provide the best services for the greatest value. A lot of businesses immediately look for the agency that works for the heavy hitters. Unfortunately, as a solopreneur, you’re probably not going to be able to afford their services. But the other fact to remember is that you may not need them. You don’t need a massive marketing drive if your customer base is only ten thousand. Once your business starts to build, you can start to focus more money on marketing.
Excellent Levels Of Efficiency
One of the final things that you need to think about is keeping your business efficient. Efficiency is important for two reasons. It will lead to better reviews from your customers and clients. In B2B market, clients expect a fast turnaround so you need to make sure you’re providing it. Typical customers don’t want to be kept waiting either. But it’s not just about delivering a fast service. You need to make sure your product is of the best quality as well. Believe it or not, the answer here is tech.
If you want to make sure you are getting the fastest results for customers, buy the latest tech. You should, at the very least, have a cloud server for your company. The expense of this won’t break your budget, and it is worth it. You’ll be able to send and deliver files securely without any issues. Transfers will be instant, particularly for clients who have access to the cloud. Even if you are working from home, a lightning fast internet connection is essential. You will need this to be able to make quick updates to your website and social profiles.
If you want to ensure you deliver a quality product, you need to establish quality checks in your business model. This is particularly important if you are using outsourcing teams to deliver a product. Remember, any actions they take will have an impact on the reputation of your business. You need to do everything possible to guarantee that you only work with the best teams. History has shown what happens when new businesses fail to deliver on quality. In short, they lose their footing on the market.
As you can see, there are plenty of issues for you as a solopreneur. You are going to have to handle most of these problems by yourself. However, if you plan your business model effectively and keep customer satisfaction as a top priority, you can overcome them. There’s nothing stopping a small business reaching the levels of success and profit of a major company. You just need to make sure that you are running it as effectively as possible.