Most of us who start a business are passionate about our niche, but we also need to make a profit.
And while passion is personal, the costs of starting a business are universal.
At this early stage, you must plan your outgoings meticulously and be realistic about how quickly you’ll engage and convert your target audience and generate income.
Because if you spend more than you earn, you won`t be in business for long!
Here are some proven tips on how to save money on your small business start-up costs and some handy examples of how to implement them.
1. Adopt The MVP Approach
New business owners often make the mistake of thinking they need the best tools and equipment and that their products and services must be perfect from day one.
But it’s not true.
Let’s look at this in two parts:
Suppose you’re starting a physical business, such as a bakery, construction business, or café. In that case, your immediate equipment needs can run into the tens of thousands, especially if you buy new ones.
You can vastly reduce that bill using good quality, well-maintained second-hand equipment.
Many online and local companies specialize in selling repossessed or no longer required equipment relative to your niches, such as kitchen appliances, construction equipment, and commercial furniture.
Products and services:
MVP stands for “minimal viable product,” it’s a product or service a company can bring to market that adequately meets the needs of a target audience at an affordable price.
It doesn’t mean using an inferior product or service because negative reviews will destroy your reputation before establishing your business.
Your MVP goal is to provide a competitive product/service and enter the market as quickly as possible to generate income.
After all, you’re a new business, so you need a selling point; at first, a lower price might be your only option.
Reducing your outgoings by buying second-hand and using an MVP are excellent ways to lower your initial costs, but what about those ongoing ones?
I’ll explain next:
2. Always minimize your overhead expenses
Most overhead expenses are unavoidable and ongoing and eat into your profit margin because, all too often, you can’t associate them with your unit or service price.
You’re providing a product/service at a competitive price. The higher your overheads, the more significant the impact on your bottom line. You make less profit on each sale.
One of the best ways to ensure you can compete and turn a profit is to reduce those overheads.
Now’s the time to be realistic about your start-up business needs. Only sign up for 12- or 24-month contracts once you’re sure they’ll support your business goal.
Another way to minimize your initial outgoings and increase profits is to use branding.
3. Be smart with your branding
Did you know people buy brands, not products or services?
For example, if you need a new phone, software tool, or local construction company, do you choose the cheapest on offer? Or one that looks good but has zero reviews?
Probably not, right?
Most people choose reputation and reliability first, where branding comes into play.
We live in a visual-driven world, which gives your start-up a genuine opportunity to engage with your target audience and land those first precious customers.
But many new business owners don’t know where to start or think branding is only a logo, a sign, and fancy stationery. While those are important, today’s consumers look for far more when choosing a company to do business with.
The good news is you don’t need a degree in branding or a vast budget to create a professional business image. You only need Ai branding tools to make branding quick, easy, and affordable.
These advanced tools can create logos, branded merchandise, and stationery, provide domains, and even design your entire social media branded campaign. Still, they help you create a consistent brand look and presence; you only pay when you’re happy with the results!
4. Negotiate with vendors for the best deal
Your ability to negotiate a better deal with vendors often depends on your niche, products, retail price, and where you buy them.
And when you’re new and orders are small, vendors try to charge you the highest rate. While that might sound unfair, it’s an unfortunate reality.
But prices are always negotiable:
Most people buying stock are familiar with MOQs (minimum order quantities). It’s the smallest inventory a vendor will sell of a specific product, and the lower the MOQ, the higher the unit price.
One way around this is to say the first order is to test the market, and the next will be larger, but you need the lower unit cost to test. Trust me, this works.
And it also applies to utilities and mobile phone contracts. When you call suppliers and tell them you’re leaving, their service becomes cheaper!
5. Outsource where possible
My old dad was ahead of his time because he outsourced staff decades before it became popular for building a professional team.
He was a small-time property developer in high demand. I asked him why he wouldn’t expand and employ a team full-time.
He replied, “Why overextend and commit your cash flow to pay employees’ wages, payroll taxes, and insurance when the future`s uncertain?”
Instead, he used subcontractors, and when the 2008 property crash hit, putting most contractors out of business and into debt, he used his savings and bought 3 more houses!
You can do something similar, by outsourcing.
Outsourcing contractors helps reduce your overheads, enables you to compete on different levels, and increases your all-important cash flow.
And it enables you to stay focused on your core mission by only paying for services when needed.
And now it’s easier than ever!
Here’s where using the gig economy comes into play:
6. Use the gig economy to your advantage
We live in a gig economy.
And you can leverage the myriad of experts available on platforms such as Fiverr, Upwork, and others to outsource non-core services and capabilities to support your business.
And the gig economy boom has lowered traditional prices because professionals provide services from countries where the average wage is lower than where you’re based.
But it also enables you to stabilize your company’s finances by only hiring people when needed.
7. Employ eager, intelligent, inexperienced people
Regardless of your market, if you only hire people with the most experience, it will be expensive.
And experience is only part of it because recent graduates have the most up-to-date information, are eager to learn, and make their mark on the world.
You can harness that enthusiasm by advertising to the less experienced generation and reducing your overheads by paying an entry-level salary.
This approach also allows you to train these receptive, eager minds to work your way.
Remember, you don’t need the best people; you need the right people.
My last piece of advice on how to save money on your small business start-up costs is already at your fingertips, software tools and apps!
Let’s look at those next:
8. Familiarize yourself with free tools and apps
More time and resources are at the top of every new business owner’s wish list.
And you can now increase both without having to bust your budget because many free software tools and apps are available to help your most modern business needs.
And the ones that aren’t free allow you to sign up for free trials to experiment and find what you need before investing.
Some popular free apps and tools that help ease the workload:
- Freshbooks and Xerox offer accounting, payroll, and invoicing services perfect for start-ups, with 30-day free trials and plans as low as $9/month.
- Burst allows you to browse a vast library and download free, high-resolution photos for your commercial use or website.
- Social media management tools enable you to analyze your target audience and develop tailored marketing campaigns.
If you put the time in now and source the most affordable options, you’ll reduce your monthly outgoings, helping you compete with your more established competitors.
And once you’ve found a foothold and are turning a profit, you can upgrade.
But right now, think big and start small.
Use my tips on how to save money on your small business start-up costs; your budget will love you for it.