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.
Hire flexible people
If you can avoid hiring people for as long as possible, it’s advisable.
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.
Try and collect any monies owed as quickly as possible, while holding on to your own payments for as long as possible. It’s imperative that you invoice your clients to get paid on-time.
Set-up lines of credit if necessary, as you will often find that the interest rates involved are much lower than you will find on a credit card.
But, all things considered, it’s always best to bootstrap your company by growing at a steady pace and reinvesting your earnings.