One of the challenges to starting a business is having a limited budget at first. Some entrepreneurs use zero sum budgeting while other seek different means of financing. As difficult as it may seem, your company can still thrive off of a smaller budget. You’ll learn good habits such as discipline and management that will do you well even your profits are already high. After all, there’s no correlation between the amount of investment and a company’s success. Many top-tier companies, from restaurants to retail, started out with little funding. These tips will help you follow in their footsteps and start your company with a limited budget:
Plan It Out
To figure out how much your budget should be, you need to have a solid business plan in place. While a business plan may sound complicated, all you need for the starting phase of your company is a one-page document that explains your company’s vision, products and services, and projected cash flow.
Once you’re clear about what your company is all about, you can move on to making a detailed budget. Do your best to estimate the projected revenue of your business over six months, then make sure to keep your expenses below that so you’re still getting net profits. List down all of the expenses that you will have to make for each month. Finally, prepare a Plan B. If you don’t meet your revenue requirements each month, what can you to do lower your expenses? This can range from promoting your company more to acquire new customers or putting in more time.
Mind Your Cash Flow
As a rule, always be careful with spending. Buy only what’s necessary, and before each purchase, think about whether it’ll ultimately contribute to your business in terms of profits. If it’s just a nice convenience that you can do without, such as a coffee machine or a fancier website feature, then you can let it go for now while you’re still trying to get your company off the ground.
Keep your company lean as it scales. You can establish business trust with a limited budget and continue to attract customers without spending a lot of capital. Most of the labor should be coming from you, and every business move should be tested out in small increments before you push ahead with it. For example, you can conduct surveys, set interviews, or create focus groups to check if people will love a particular service or feature you want to launch. This way, you’ll quickly find out what the market thinks and avoid wasting money.
In any case, as much as you’re trying to keep expenses low, your company should also generate sales and profits as soon as it can. By managing both sides of your company’s cash flow well, you’ll always have money coming in, and your company will be able to keep running.
When your company’s still starting out, you don’t need a full-blown office yet. Staying in an office is expensive, and unless you need extra space for manufacturing or product storage, you’ll save a lot more by making your company home-based. Remember to look at your area’s regulations first to find out how to conduct a home-based business legally.
If you have a small team, a more comfortable alternative might be a coworking space. You can also work remotely, with employees staying at their own space rather than gathering into one huge office. Aside from lower rent, remote work allows you to save on office commodities such as electricity, wi-fi, and drinks since each employee provides these for themselves.
Choose Affordable Tools
Instead of buying new furniture and equipment, it’s cheaper to buy them secondhand. Whatever you need, you can easily find a secondhand version of it. Your business banker might be able to point you to businesses that are liquidating and looking to sell their equipment. Once your business is stable, you can reward yourself by investing in new furniture.
For some equipment, like fax machines and scanners, there are creative ways for you to avoid buying full-blown machines. Luckily, we’re in the 21st century, so there’s an app for practically everything. Send a free fax through your phone with FaxBurner, or scan your documents to send via email. The results are as high-quality as with the original machines, and all you need is your phone, too! If you’re located near a university, your photocopying and printing can be outsourced there.
In line with this, plenty of SaaS (software as a service) tools are available for businesses, from cloud file storage to project management software. You usually only have to pay a small amount per month, and there are packages for all company sizes.
Slow Down On Hiring
As a company founder, do as many of the tasks on your own at first. With specialized tasks that you’re not skilled at don’t have the time to learn about, such as legal issues or marketing, there’s always the option of working with independent contractors. These include agencies or B2B businesses, freelancers, and consultants.
Unlike full-time employees, independent contractors can give you their full expertise while remaining flexible. You can adjust their projects based on the needs of your business. Employees are also much more expensive, since you’ll have to handle tax forms, file extra paperwork,and take care of other expenses. If you really must hire someone, do it slowly, and keep your team small without being overwhelmed with work.
One function that you can take on yourself, especially when your operations are still small, is accounting. You can rent an office that fits into your small budget and monitor your expenses there as well. Instead of working with an accountant, you can turn to easy-to-use software solution. Most of what you need to know about taxes is also available online, or you can have an accountant walk you through it once so you can do all of the filings yourself.
You don’t necessarily need to have a huge amount of money to start a business. For one, a good piece of advice for businesses is to start with a minimum Viable Product (MVP), and many startups have been able to launch in 7 days, using a simple website and one product or service.
Since business is anything but predictable, sticking to a budget will teach you how to maximize your resources and be thoughtful with your purchases. Whatever stage your company is in, both of these are essential. Play it right, and sizable profits can grow from your limited budget.