How to Start Your Own Business for Less
The average microbusiness costs $3,000 and most small businesses are launched with a budget of less than $5,000. That may not sound like a lot of money when you consider the vast sums of cash that big businesses throw around, but it begins to look like an insurmountable sum when you consider the average Millennial has less than that in their savings account.
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It also seems like a lot of money when you consider how likely a new business is to fail, with 50% of businesses failing before they reach their tenth year and 20% failing before they make it to the end of year one.
With that in mind, it’s crucial that you start with as little money as possible. Not only will this reduce the risk and losses, but it will also reduce your responsibility. If you’ve remortgaged your home to fund a business, you’ll be less inclined to cut your losses when it begins to fail. You’ll pump more money into it, borrowing from friends, banks, and generally doing what you can to keep those dreams alive.
If you’ve only invested a couple of grand, you’ll take more of a proactive view and will back away as soon as the business dips into the red and starts costing more than it’s worth.
Take a look at these tips to discover how you can minimize essential business costs and launch your company for less.
Focus on a Cheap Industry
The best way to launch your business for less is to focus on an industry that doesn’t require a lot of capital. Forget about the business you want and focus on the business you need and can actually afford.
Run the calculations in advance and make sure it’s a viable business opportunity based on the funds you have. For instance, if you only have $3,000 to spare, starting a business that requires you to buy and sell food, drink, and other perishables is a bad idea.
Not only will you need to buy large quantities of stock to create realistic profit margins, but you’ll need to adopt an intensive marketing plan to ensure that your product starts selling straight away. If not, then by the time those sales start trickling in, your stock will expire and you’ll be forced to cough up some more cash.
The best business is something that allows you to create a profitable product from nothing or from a basic, affordable, and non-perishable stock. For instance:
- Digital products
- Online services
- Drop shipping
- Painting and decorating
- Pet sitting
- Window, car, and house cleaning services
- Soap making
- Candle making
Unless you’re going to spend several weeks doing some in-depth research, it’s important to overestimate how much you will need to spend. Every aspiring business owner miscalculates just how costly this process will be, making mistakes such as:
- Calculating stock costs based on large wholesale orders and quantities they can’t afford.
- Not including shipping or taxes.
- Not including insurance costs.
- Assuming instant sales and success.
- Forgetting about trademarks and copyrights.
Use a Shared Office Space
Small businesses pay an average of between $2,000 and $4,000 a month for office space. That’s a huge cost and one that many small businesses simply can’t afford. Luckily, there is an alternative, one that will allow you to rent a professional space for you and your employees, but without the massive obligation that renting a commercial space can bring.
A shared office, also known as a coworking space or serviced office, provides all the equipment, peripherals, services, and amenities found in a traditional office, but you pay when you need them and don’t sign any long-term contracts.
You can rent space for all your employees at the cost of a few hundred bucks a week. If things go well, you can scale up at will. If everything goes wrong, you can back away without being forced to keep making payments on a space you no longer need.
We’re living in the age of the freelancer. It’s a gig-economy, and that’s great news for talented creators as well as the businesses and entrepreneurs that hire them. Freelancers can provide the work you need as and when you need it, and you don’t need to pay them a salary or even agree to a weekly or monthly retainer.
Many freelancers are willing to work on a fixed-price basis. Simply tell them what you need, wait for them to provide a quote, and then put the money in Escrow until the job is done. Some freelancers also work on an hourly basis, while others will tell you what they can do and how much they charge, before waiting for you to come to them.
There are a few simple things to keep in mind when hiring freelancers, however:
- Cost: Competition keeps prices low, but cheap isn’t always good. Many cheaper freelancers don’t have the skills you require or work on a part-time basis. The result is a low-quality work that could jeopardize your business. You need to pay for quality in this industry, but at the same time, you can negotiate reduced prices with better freelancers.
- Samples: Never ask for free samples. Freelancers are there to work and get paid and it’s disrespectful to expect otherwise. However, you can hire multiple freelancers for small jobs, using this process to test the quality of their work.
- Be Wary: Although they are in the minority, freelance sites have scammers that will try to cheat their way to your money, often by delivering plagiarized work or using cheap tricks to get around plagiarism detectors. Use CopyScape and Google Image search to check for plagiarized work and if you smell a rat, trust your intuition and ask questions. For instance, if a freelancer can barely speak English when messaging you but delivers pristine work, something’s amiss.
- Pay a Fixed Price: You can pay freelancers on an hourly contract, but it’s usually best to go for a fixed price. Freelancers tend to work quickly and more productively when they’re not on the clock. It also means you’re not paying for the time they spend thinking, planning, and preparing. Some writers and designers will be cheaper if hired on an hourly rate, but they are the exception and it’s always best for your finances and projections if you work with fixed prices.
Freelance sites can help you find the right person for the job. They will also do all the legwork for you, facilitating the exchange of messages, information, and money, and allowing you to check the history, credentials, and reputation of the contractors you hire.
Try the following sites to complete basic tasks for your business:
Do It Yourself
If you can’t afford to hire agencies and experts, do it yourself. That’s easier said than done, of course, but you don’t need to match the skills of the experts in order to get the job done.
Let’s use Search Engine Optimization (SEO) as an example. This is something that all businesses need if they have any kind of online presence. The problem is, SEO companies charge thousands of dollars a month, while skilled individuals charge upwards of $100 an hour. What happens if you’re running a small computer repair business and simply want more customers in your local area?
Your options are not to go big or go home. SEO is complicated and multi-faceted, but if you have a small budget and small goals, it need not be that comprehensive. Learn some of the basics yourself, use your free time to initiate them, and hire freelancers to fill in the gaps.
You can do the same with marketing. Countless small companies spend a fortune paying marketing agencies to run their Google Ad accounts, but Google has made this process incredibly easy. What’s more, if you spend more than $10 a day, they’ll assign you an ad specialist completely free and they’ll do all of the hard work and strategizing for you.
YouTube and website tutorials have made it easier than ever to perform a host of essential tasks yourself. It can be frustrating, you will make mistakes and you won’t get the best results, but you also won’t bankrupt yourself in just a few weeks and that’s more important.
Of course, you’re never going to compete with the biggest companies in your sector by doing everything yourself on a shoestring budget. But you don’t need to just yet. When your business is new and your budget is limited, the only thing you need to focus on is growing, establishing a profit, and getting to a point where you can afford (and justify) those big expenses.
Cut Ties with Ineffective Marketing
Small business owners often get trapped in a marketing money pit, throwing money at a platform because they’ve been told that it’s the best option for them. Facebook Ads is a great example of this. Done right, it can greatly improve your brand exposure and increase sales. If not, it could drain your marketing budget and leave you with very little to show for it.
Merely throwing more money at those ads or constantly changing them in the hope that one will stick isn’t going to work. Just give up and move onto another platform. Invest small sums of money in each method, keep detailed statistics relating to clicks, engagement, and sales, and stick with the method that delivers the best results.
The biggest brands can afford to waste huge sums of money on ineffective marketing methods. To them, it doesn’t matter if they’re only getting $10 worth of sales for every $1,000 they spend. They can write those expenses off on the basis that they helped to increase exposure and reduce their tax bill.
For small businesses, however, you simply can’t afford to waste that sort of money and need to look for marketing platforms that deliver close to $10 of sales for every $10 of budget.
Be Wary of Marketing Companies
Marketing companies charge a premium for their services and don’t always deliver the results you seek. This is especially true for PR companies, as most of their fee is tied into the planning, writing, and design of the press releases and stories, as opposed to the actual benefits they deliver.
They’ll often dismiss your complaints of poor results by claiming they helped you to get “exposure”. This is their get-out clause and doesn’t mean what you think.
Exposure is a valid thing and it’s something that big businesses will factor into their multi-million-dollar marketing budgets. But exposure is a non-starter for a small business. The fact that your ad was seen by 10,000 people means nothing if they don’t visit your website or buy your product.
The PR company will try to convince you that those 10,000 now know about your brand and will be more inclined to talk about it, buy from it, and tell their friends about it. But think about that for a second: How many ads do you see every day? You’re bombarded with them, from the pop-ups and banners on the internet to billboards, newspapers, TV commercials, and more.
How many of them actually stick in your mind, how many will you still remember several minutes later, let alone several days, weeks or months?
Exposure doesn’t mean anything anymore because everyone is overexposed. If you do decide to work with a specialist agency, PR company or expert, ask them what sort of results they expect to deliver and if everything revolves around “exposure”, take your money elsewhere.
Summary: Create Away
As scary as it can be to start a new business and put all that capital at risk, it’s also one of the most exciting things you can do and it’s something that could set you up for life. A successful business could allow you to quit the rat race and work on your terms, which is something that everyone dreams of and something that the American Dream was founded on.
Just don’t let that excitement and that eagerness go to your head. It’s important to take your time, do your research, and plan extensively. That way, you can keep those initial costs low, reduce the risk, and increase your chances of becoming a successful business owner.