Starting a business on a tight budget may sound confining, but it is also challenging. Entrepreneurs get to stretch the limits of their creativity and innovation in tandem with small budgets.
New skills and persistence are developed along the way, adding another skill set to your entrepreneurial toolbox. The temptation to go all out is there, but the fact is that if you don’t have financial resources, your business will probably go under.
To help prevent this taking place, here are several tips that can keep you afloat when times are tough.
Source: Freepik.com
Start small
Unless you have a big idea and a big budget, plan to start small and build your business as funds become available. If you’re at this point, you’re probably working full time, and financing a small business with any spare cash you have.
Starting small helps to curb your appetite for spending on stuff you don’t need in the beginning, but it also helps to keep you free of excess debt.
Preferably, you won’t have salaries to pay in the beginning, but it will also be tough going to provide a budget for advertising. This is where limited budgets demand that entrepreneurs get creative with their skills.
Rope in friends or family members to help spread the word about your business on social media. Think of other ways to advertise in a cost-effective way without being too cheap. You’re building a brand however, so you want to start with a reputation that grows from strength to strength.
Always aim for paying customers when starting out instead of aiming for numbers. Numbers can mean good profits, but they can also add to your debt buildup.
Keep the cash flow flowing
Avoid overburdening yourself with seed money at the start of a business. When funds are limited, you need to limit the debt burden by not taking out additional loans. Sure, you can dip into your credit cards as a sole proprietor to begin with, but you also need to watch the interest repayments on this source.
Also, you don’t want to spend more than you’re prepared to lose. So, while you want to keep cash flowing as much as possible (however small the trickle), keep a tight rein on expenses.
Do you really need a printer at home, or can you use facilities close by? When you start calculating the cost of new home equipment, you will probably find that using this money on advertising and marketing will be a better investment.
If you have a nice nest egg tucked away or even if your credit cards allow it, the purchase of a business for sale may be your best option. The only way to find out what suits your budget is to do research online. You may well learn that buying an existing business is the solution to exercising your entrepreneurial talents.
Source: Freepik.com
Keep the overheads low
A startup or an existing business will require you to keep overhead as low as possible. Maintain accurate records of income and expenditures to keep your business on track. Resist the urge to splurge on labor, equipment and outsourcing.
Always look at what you can do yourself before paying someone else to do the job. Look at finding affordable labor in international markets if you don’t have another choice at the beginning. This may be a risk, but it is one that is worth following up when your budget is stretched to the limit.
If your business is making a small profit, set aside 50 percent of each month’s sales to build a small backup fund. Reinvest the balance to grow your operations. Most entrepreneurs start with big dreams and end up living off their families’ good graces.
This is an option, but only if you can guarantee that your business will turn a profit in a reasonable timeframe. Unfortunately, there are no guarantees in life, let alone business, so this is one situation that you want to avoid.
Work within competitive limits
Your market is probably filled with competitors who are working with limited budgets. Will you compete and survive, or will your business fold? Build a business model that is sustainable moving forward.
Unless you know that any cash you spend is going to add value, don’t spend it. Entrepreneurs must learn to be innovative if they’re going to survive in the long-term. Learning self-discipline is one starting point. The other is to maintain focus and humility.
Don’t delve into profits to create an impression by purchasing luxuries, for example. Maintain a lean mindset from the outset to create a profitable business habit for the long-term.
Even if you survive on one income and use this to fund your business, continue to forego luxuries until your startup is stable. You will be glad for the sacrifice down the line, and have every reason to be proud of your achievements.
Evaluate purchases and leasing costs
While paying down personal expenses, look at leasing instead of buying once your business is profitable enough. Leasing places the burden of equipment replacement on the vendor, helping you to transfer some of the economic costs of operations to someone else.
Once you can provide proof of profitability, banks may be willing to give you a loan. Until this moment arrives, why fork out $1,000 for equipment if you can lease it for $70 a month? Rather use the extra cash for advertising, for example.
Also, look for cheaper options whenever you intend to make a purchase. Instead of outsourcing accounting, look at purchasing book-keeping software. The same concept applies to digital marketing software.
Compare prices for CRM packages before you employ an online digital marketing company to attract customers. If a young family member is looking to gain work experience, offer them the opportunity to manage your social media accounts free of charge. In return, they will be able to add this job to their resume.
Essentially, there are innumerable ways to work with a limited budget when you use an innovative approach. This is what gets the best entrepreneurs past the starting post and headed toward success.
Contract Compliance
Even as a startup, you would be making many deals with both vendors and clients. Make sure that your contract compliance is always at 100%. Not delivering on agreed-upon KPIs can lead to a bad reputation or worse, lawsuits. Startups are already at a precarious state. Don’t put your brand in any hot water because you didn’t comply with the terms that’s already been signed and agreed upon. Having said that, it’s important that you don’t oversell. Only offer what you can provide and nothing above that.
