Lots of people want to start their own business. It is exciting, and there is the feeling of being in control of your destiny, which is usually not the case if you are working for someone else. There are numerous other reasons – perhaps you were made redundant and need to find new income? A prominent motive for many female entrepreneurs is the objective to fit work around a young family. Some people are natural go-getters and don’t fit into the linear vertical structure of conventional companies.
Most businesses need capital to start up. Even purely digital businesses, for example, who are creating an app, will need to spend on development and marketing.
Here are some possible initial finance requirements:
Setup fees for registering a company and legal, insurance and accounting costs. Supplies of raw materials or manufacturing parts. Equipment, specialised machinery or software. Vehicles, either bought or leased.
Premises space: this is a huge expense, and on top of that there are internet service fees, utility costs, cleaning services and whether to outsource back-office tasks, like wages and invoicing. Food-related businesses will need training for staff and must meet strict hygiene standards.
Operating expenses, including materials, payroll, freelance contractors, marketing, advertising, and many other incidental things to consider. Cash flow is king – most successful SMEs are very hot on ensuring invoices are paid on time, because income is mission-critical when operating on a narrow margin, as happens with most early-years businesses.
Read on to learn some ways to keep these costs down.
- Start Small
Many businesses can operate from home until they grow big enough to need premises. Richard Branson began with a mail-order record business, and Alan Sugar first sold electrical goods out of the back of a van. Keep costs down by avoiding expensive premises fees and additional utility bills, employing as few staff as possible and holding off on offering more expensive product lines until your earnings are more steady and reliable.
If you are starting out as a sole trader in an attempt to control business start up costs, make sure you know how to safeguard your finances against economical factors and availability of work, as well as preparing for the future.
- Try out a Minimum Viable Product
A new concept in software development is the Minimum Viable Product (MVP) – that is something that functions but with no bells and whistles. As customers interact with it, you can see what needs changing and build it up from there. Uber started this way.
However it doesn’t only apply to software – many physical products can be prototyped cheaply and simply, then made better from feedback and marketing input. This allows income to be made whilst products and services are still being developed.
- Outsource as many costs as possible
In today’s world, a freelancer is only a click away. There are many sites where you can hire a freelancer or put up your project and let people bid on it. This is a good way of finding talent without paying the top rate or having a full-time employee. The best sites have escrow facilities (so you deposit money, but it is not paid out until the job is completed satisfactorily) and feedback systems so both freelancer and buyer can be rated.
These are some useful methods for keeping startup costs down. The most important factor to keep in mind is to ensure good turnover and watch costs carefully so that the enterprise builds profitability from near the beginning. It is far easier to increase production, than scale back if you hit a road bump or the economy takes a downturn.
For clear, reliable, professional business advice, get in touch with DLR Accountants; based in Colchester, Essex but serving the whole of the UK, we have ten years experience providing high quality accountancy services to clients large and small.