GUYS. I’m so excited to be able to say that I am thisclose to launching my new startup. Yes, I’m starting a business! Things have been feeling like Grand Central Station for the past few weeks but I’m over the moon that this is all going to become real.
Starting this business was something I seriously wanted to pursue but decided to hold off until after my debt was paid off. Maybe it was a form of procrastination but I just couldn’t take on a new endeavour knowing I had other fish to fry first. I also didn’t want to get in to debt again by taking out a business loan so I’m self-funding the majority of my startup and operational costs, while finding the least expensive way to go about it (without cutting on quality of course).
I’ll reveal all the details of the business soon but was inspired to write a post about how I’ve managed to get my idea off the ground on very little money. Entrepreneurship, as you know, is financially risky so I’ve tried to minimized my risk as much as possible. Here are my tips on how you can make your business idea a reality when you don’t have a ton of capital.
Determine your expenses for the first year
Figure out any products or services you’ll need to purchase and divide them by startup and operational expenses. Startup expenses are what you’ll absolutely need before your big debut. Be realistic: do you really need business cards before you even launch? Yes, you’ll eventually need them if you plan on self-promotion or networking so this is a cost that can go under operational expenses.
You don’t need to list amounts just yet – the point is to get you thinking about what you’ll need to invest in.
Consider how much you can afford out of pocket
What do you have currently set aside for your business? You’ll need some money in the bank. Think about how much you’re willing and able to spend on your business. This is your biz budget and the amount of money you’re willing to invest to make it happen, Captain. Set an amount that is realistic but won’t end up bankrupting you. You don’t want to be one of those “I spent $50,000 on an idea and I have yet to make my first sale” stories.
Okay, so you know what you’ll need to spend on and how much you have to spend on everything. Now you’ll need to put some concrete numbers beside each expense.
1. Ask, “What can I do myself?”
What skills do you have that you can leverage? I created and designed my blog so I felt fairly confident I could pull off a website too. I won’t lie – it was a huge pain. I used a new theme platform and basically had to learn everything from scratch. I spent countless hours on YouTube and support forums but I now have this kickass site that I built all by myself! The theme, domain and hosting was about $200 but hiring a professional web designer could have run me in the thousands. It might be worth your time, it might not, so think about whether the cost savings make sense in consideration of the time it’ll take you to do it.
2. Barter with a friend
Do you know anyone who might be able to help you in return for your services or skills? I had a designer friend ask me for some financial advice and in return would help with any graphic elements I needed for the website. Graphic designer I am not so I jumped all over her offer. I also had a copywriter friend proof and copyedit my site in return for helping her with her finances. Your services don’t have to be specialized to count – cleaning their home or walking their yappy dog can be much needed and appreciated too.
3. Know a guy who knows a guy?
People genuinely love helping people reach their goals. If you don’t have anything to barter with, ask how much a friend will charge you for his or her services. Often times they’ll give you a discount from what they would normally charge a client. It’s bad etiquette to ask someone to do something for free though so unless they offer to do it at no charge, expect to pony up some dough.
4. Outsourcing to low-cost suppliers
Fiverr and Elance have been HUGE for me. Despite being a business major, I was banging my head trying to put together the financials for my business plan. I found a lovely accountant on Fiverr who within a few hours had all my statements in order when it had already taken me a week. Plus she pointed out some errors that I made and explained how my retained earnings were totally out of whack based on my withdrawals. How much did she charge me? $15 bucks!
Elance is great in that you can let people know what you need and interested parties will submit a proposal outlining their credentials, what they can do for you and how much they’ll charge. Costs will vary which is great because you’ll get a range of quotes from people and can find something that’ll fit your budget.
Speaking of a range of quotes, try to get as many as you can from different suppliers. This applies to offline suppliers and the ones you find through Elance and Fiverr. I was looking for printing quotes and received $138 all the way up to $275 for the same project. The cheapest or priciest may not always be the best so do some due diligence on each company and see who can supply the best product or service.
5. What’s the state of your business?
You’ll want to minimize your startup capital as much as possible. If you’re just starting up, don’t purchase things prematurely. Do you really need to print 500 copies of your workbook when no one even knows you exist? Heck, I say there are some things you can hold off until you get your first customer. Maybe plan to print ad hoc for your first few customers until you are confident you’ll use up workbooks in bulk.
6. What’s the nature of your business?
Because most of my business transactions will be completed online, I opted with an e-business banking account which has no monthly fees. Business bank accounts usually charge a monthly fee based on in-person services, which your business might not need.
There are many advantages to an online business because most times your customer won’t see your operations. A home office doesn’t need to look as fancy if you’re the only one who sees it so a setup on the dining room table might be perfectly fine for this stage of your business.
7. Apply for grants
Yes, there is money out there for the taking! Many government programs offer grants to small business owners. There are a ton out there for young entrepreneurs too. Do a Google search and see which ones you qualify for. Grants aren’t like loans in that you’re not expected to pay this money back so it’s always worth applying for.
It’s free money but it ain’t easy money. They expect you to submit a polished business plan and may ask you to provide proof of matching funds. Grants aren’t like a full scholarship – they want to know you’re investing in yourself too!
The grant I applied for had me pumping out a 140+ page business plan which took me over a month to do. It was a total pain but hey, I figured I needed to have one eventually. The money I requested was for “nice to have” things. An application doesn’t mean a guarantee and it’ll take a few months until they award you with anything anyway, so my need for funds was for a bigger marketing budget and for a new laptop. Two things that if I didn’t have wouldn’t mean the doom of my business.
8. Start small with your marketing
My advertising budget was the plug in my budget. After everything was accounted for, whatever I had left was going towards marketing. Fortunately you can achieve a lot with very little. Start by reaching out to your network and generating some interest there. Don’t be afraid to self-promote either – if you’re still working your 9 to 5, quit bringing it up and talk about your new business the next time a friend asks you “How’s work”? Implement some guerilla marketing tactics by targeting efforts to a small, targeted group rather than attempting to reach a large market who may not be your target audience at all. And of course, leverage social media, make connections and hustle your butt off!
For another great read, check out The Penny Hoarder’s post on How to Start a Small Business with Less Than $100.
Have you started your own business or planning to? How were you able to cut on your costs?