Launching a new startup is an exciting opportunity, and one with the potential to make you very wealthy over the next several years. However, one of your biggest obstacles is going to be getting started on a slim budget. If youdon’t have much money to work with, and the revenue you’re generating is limited, your only option is to cut startup expenses drastically and start operating lean.
So how do you do it?
Let’s start by looking at office and real estate costs, which are going to be some of your biggest expenses. Depending on where you establish an office, you could end up paying thousands, or even tens of thousands of dollars every month.
For most businesses, this simply isn’t necessary. There are several ways you can drastically cut this cost.
Initially, you should consider going fully remote. Not every business is going to work well in a remote environment. Yet, if most of your operations happen digitally, there’s nothing stopping you from adopting this framework. You’ll save a ton of money on office and utility expenses, your workers will be happier and more productive, and you’ll have a much easier time scaling if you do.
Look for inexpensive alternatives where you can rent real estate. For example,some storage facilities have office rentalsthat you can use temporarily or on a more long-term basis. These office spaces are inexpensive, yet perfectly functional, so they could be exactly what you need while you get your business up and running. As an added bonus, you’ll have access to nearby storage units. Here, you can keep and manage your excess inventory – which is going to be especially important as your business grows.
Consider sharing a space with someone else. That could mean leasing the office and subleasing it to another business, mitigating your startup expenses. It could also mean taking advantage of a public co-working space, where you and your employees can gather for important meetings. Shop around for opportunities to get the space you need for less.
If you can’t take the business remote and there don’t seem to be any viable alternatives in your location, you might be stuck with a conventional office lease. If this is the case, don’t hesitate to negotiate with your landlord. Sometimes, just asking for a lower rent price is all it takes to get a better deal.
Equipment costs are another major line item for most startups. At the very least, you’ll need to buy some computers and other technological equipment so you can handle your basic responsibilities. Depending on your operation, you might also need to buy factory equipment or sophisticated machinery, which factor into startup expenses. This can get expensive fast.
You might be tempted to buy everything you’re ever going to need upfront, but it’s better to start with the basics and work your way up. There’s no reason to completely exhaust your budget on an initial shopping spree when you can get by with a handful of initial investments. There will be plenty of time to expand later.
For the most part, leasing equipment is more cost-effective for new startups than buying. You’ll have much lower upfront costs, your monthly expenses will be predictable, and you may not have to take personal responsibility for maintenance and repairs.
For most businesses, there’s no need to overspend onthe latest and greatest technology. You can make do with the previous generation of technology. Buying used, and utilizing not-quite-current-gen technology could end up saving you a ton of money.
If you don’t have the money to buy new equipment, consider trading or bartering for it. In fact, you can trade or barter for almost anything your business needs if you find a willing participant. Get to know other local business owners and consider trading products and services with them.
The salaries, wages, and benefits of your employees will add up quickly, representing one of your biggest expenses in keeping the business operational. Here are some of the most important ways you can control these costs.
Only hire who you need now
Some business owners like the idea of hiring a full team, then gradually growing into a form that can utilize that full team. Instead, it’s usually better to start with only who you need now – and hire people only when you start needing them. Otherwise, you could end up seriously overspending before you have a steady stream of revenue.
In its startup environment, individuals typically serve many different roles simultaneously. You should focus on hiring people who are flexible and who have general skills that can be applied in many areas; don’t lock yourself into a specialist who refuses to wear more than one “hat.”
Experienced people are more knowledgeable and more efficient, but they also happen to be more expensive. You can save significant money in a startup by hiring for talent, rather than experience.
Use contractors to fill in
If you don’t have all the team members you need, if the business is growing faster than you anticipated, or if you just need some extra help now and then, consider working with contractors. Contractors are inexpensive and flexible – not to mention, often easier to hire.
Next, you need to think aboutmarketing and advertising.
You can’t totally eliminate your marketing and advertising budget, but you can focus on organic, long-term strategies that allow you to build your reputation and brand inexpensively over time. These strategies include things like search engine optimization (SEO), social media marketing, and email marketing.
Strong client relationships can create some marketing for you. You’ll get better reviews, more recommendations, and more recurring revenue from existing customers. Make sure your first clients remain your top priority.
Consider saving money in marketing and advertising by minimizing competition. Look for opportunities that aren’t competitive. This includes niches that aren’t currently filled by competitors and mediums that aren’t commonly employed.
There are many significant startup expenses you’ll face as a new company that aren’t referenced on this list. That’s because many expenses aren’t negotiable and don’t provide you with many opportunities to save money. For example, taxes are unavoidable, licenses and certifications may have fixed costs, and there’s only so much money you can save on the insurance your business needs.
We’ll leave you with some final tips on how to save money in a new startup:
Never buy more than you actually need. You can plan ahead for what you might need in the future, but you also shouldn’t get too far ahead of yourself.
There are plenty of free tools and resources for startups to use, including open-source software for almost all your business needs.
Ask for discounts and negotiate
Don’t be afraid to ask for a discount, or to negotiate for a better price.
Be willing to trade or barter
You can trade or barter almost anything, so take advantage of this.
Look for ways that you might be wasting time or money in your business; for example, do you really need to have a morning meeting for an hour every day?
Whatever stage of growth your startup is in, you’re going to need to take your startup expenses seriously. If you don’t get your expenses under control and build a foundation for a profitable machine, your business is going to struggle. With a tighter leash on your biggest costs, you’ll be in a much better position to generate a profit and thrive in this environment.