You spent a lot of time acquiring the funds to start your business. It took multiple attempts to get your business loan, or many months of crowdfunding, but you’re finally in a position to set things in motion.
Just like that, you run into one of the biggest small business roadblocks.
An enormous percentage of startups fail because the owners spend too much money during the startup process. You can’t afford to throw all of your funds down the drain right away, so let’s analyze the best areas to save valuable cash.
Keep Your Team Small
A small team will be more affordable than a large one – especially during the startup process. You’re at the stage in your business’s lifespan where you’ll likely have the least amount of money. Every penny must go towards growing your business and getting it off the ground, so you can’t afford to build a huge in-house team at this point.
Ideally, you will do everything on your own. Focus on picking the right hires in the future and spend the startup phase handling as much as you conceivably can. It’ll mean you don’t spend any additional money on employees, which can save thousands over the first year or so of your startup.
What if you physically can’t do everything alone? It’s a problem many people experience when starting a business, particularly when it comes to very skills-based jobs. If you don’t have enough time (or talent) to do things, then outsource these tasks to freelancers or different agencies. Different sources claim different things regarding how much you’ll save when outsourcing, but the average across all industries evens out just over 15%. That’s a large chunk of your budget saved by keeping your in-house team small.
Don’t Blow Your Budget On Office Space
Another key reason to opt for a smaller team is that it saves money on office space. If you’re one person handling everything, then you can easily afford to work from home. Just like that, your office costs reduce to nothing because you don’t have to pay rent for professional office space.
Ironically, you can actually use things like your energy bills as a business expense to reduce your tax return when you work from home. There’s even an opportunity to claim tax relief on certain things, which helps you save even more money overall.
These savings are also possible when you outsource, so don’t feel as though you’re missing out if you can’t work completely alone. Outsourcing means you work with people in other locations; they may work from their own office buildings, but you don’t have to pay for those costs.
When you consider that the average cost for a 100 sq ft office per person, per annum ranges from £5,957 to £12,028, you’re saving a lot of money. That upper figure is for London offices, so imagine you hire, what, five people to work for you in an office. You’re blowing over £60,000 on office costs alone – and that’s before you even factor in their wages, benefits, etc.
Make Use Of Affordable Storage Solutions
As a startup, if you are selling physical products, you’ll find yourself in need of different storage solutions. The most obvious reason for this is to store your products and goods. Initially, you assume that the best approach is to pay for warehouse storage straight away.
Warehouse storage has some benefits:
- You never worry about running out of space
- You normally have a direct link to shipping/delivery companies
- It tends to result in an overall faster shipping process
That’s all well and good – but how much does it cost? Renting warehouse space is not cheap and can set you back thousands of pounds a year. It’s almost as bad as renting office space!
You may think there’s no solution, though two obvious ideas spring to mind:
- Store items at home
- Look for self-storage facilities
You’ve no doubt heard many success stories that began with business owners running their companies from their garages. If you have storage space at home to keep your items, then make use of it. It’s especially useful during the startup phase when your demand is at its lowest. You do not need loads of storage space, so you can afford to keep things in your garage, loft or home office.
If you can’t store things at home (maybe you live in a small flat) then storage units from a self-storage facility are the next best thing. They’re highly affordable and you only pay for the space you need. It leads to dramatic cost savings when compared against warehouse storage – and you can also size up to pay for more storage as and when required, or size down if you overshot your initial stock.
Focus On Free Marketing Exploits
Businesses can spend almost all of their startup budget on marketing, and you can understand why. A good marketing strategy lifts your company up and broadcasts it far and wide. The theory is that investing heavily in your initial marketing exploits will get your business up and running a lot faster.
Of course, this comes with a gigantic caveat: spending money on marketing does not equate to success.
There’s no guarantee that your marketing exploits will even work, which is why it’s much smarter to save money in this area, to begin with. Invest later on, but focus on using free marketing ideas to spread the word about your business.
Some examples include:
- Using social media and your friends/family to share your business
- Adding promotional decals to your car
- Making promotional bags or clothing and handing them to friends/family
You have to think small before you go big. Establish a small presence within your local community and then build on this with paid marketing in the future.
Targeting your team, office space, storage solutions and marketing exploits will help you save so much money during the startup phase of your business. Cost-cutting gives you more cash to play around with and fall back on if things don’t go according to plan. You also reduce the chances of falling into significant debt and have a greater possibility of making your startup thrive.
