Simple Startups

Discover the secret to bootstrapping success

empreender

• Publisher: Bibliomundi
• Year: 2020
• eBook ISBN: 9781526025227
• Edition: 1
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

Starting a business can be costly, especially in certain fields such as brick-and-mortar and retail.But there are ways to drastically reduce your startup costs, and to secure funding without giving away the rights to your company, or going into serious debt.In this guide, you are going to learnabout some of the best ways to save money, get profitable faster, and avoid having to seek funding before your company is truly ready.You're going to learn how to start your business with the least possible investment, and how to manage your money until your company becomes profitable.

Sticking to Your Budget

Let’s talk about a few things you can do to make sure you stick to your budget once you have developed it. After all, a budget won’t make a difference if you don’t stick to it!

Using Credit

There may be times when using credit is absolutely necessary, but try not to use it unless you have to. Interest rates vary based on the type of loan/credit and your credit history, and can be as much as 30% or even higher for some types of high-risk loans. This kind of expense can destroy a brand-new company if it’s not managed carefully, so it’s wise to avoid using credit if at all possible.

The only thing you should use credit for is to obtain inventory, because it’s something you can sell for a profit, and then only if necessary.

For example, if you find a good price on inventory that is a limited time offer, or if you run out of stock of your best-selling item and you need to get it back in stock urgently and you are waiting for payments to come in, then you can float with credit.

If you do this, be sure to pay back the entirety of the loan as quickly as possible, ideally within 30 days in order to avoid interest. Most credit cards will not charge interest until they generate a statement, so if you can pay off the balance before your statement is generated, you probably won’t have to pay interest.

This isn’t true for loans, however, so be sure to check the terms of any loan to see just how much you’re going to have to pay back.

Remember, if you end up paying high interest on something, even product you intend to sell, you eat into your profits. This is especially notable if you’re in a field that operates on razor-thin profit margins, such as consumer electronics. Such interest payments could erase your profits completely.

You may also occasionally have emergency expenses that you must use credit to cover—such as an unexpectedly high utility bill or some other expense you couldn’t have anticipated. This is another valid reason to use credit, but try to avoid doing so if you can find any other option.

Don’t forget that you can often transfer balances from one card to another, so if you have a balance on a card and you know you can’t pay it off in time to avoid interest, you could transfer the balance to another card with a lower interest rate or to buy time to pay it off.

Also, consider getting business credit instead of using your personal credit. Some types of business credit can be obtained without risking your own personal credit score or your personal income, instead being opened in the name of the company using the company’s Federal tax ID number instead of a social security number.

Be sure to ask if the creditor requires a personal guarantee, also called a PG. If so, it means you could be sued directly if you default, and it can be reported to your personal credit report.

Keep An Eye On Cash Flow

In the early stages of a startup, cash is king. Cash flow is something that can easily get away from you if you’re not careful.

Be sure you carefully document your business expenses, including noting the date, amount, items purchased, where they were purchased, and keep receipts.

Not only will this help you stick to your budget, but you will need this information for taxes, because you will pay a huge amount of money in taxes if you aren’t able to claim deductions for your expenses!

Some expenses can’t be written off on your taxes, but save the receipts anyway. You never know when you may need them.

Tax laws can and do change sometimes, and not only that, you may need to prove expense figures if you later decide to sell your company.

If you have employees, be sure that anyone who has access to petty cash or to company funds knows they must clear purchases with you first. One of the biggest reasons companies go over budget is through employees spending money on items that aren’t in the budget.

It’s always difficult when you don’t want to micromanage employees. Just be sure to let them know that cash flow is tight, and that’s the reason they are being asked to clear purchases with you first. You don’t want them thinking you don’t trust them.

Saving Money

Now let’s take a look at a few ways you can save money on those things you do need to buy.

• Don’t buy anything you don’t need. It seems simple enough, but you’d be surprised how many people waste money on things they don’t really need, such as decorative things for their office or renting a fancy space for their company. Buy those things once your company is profitable. Don’t buy them in the beginning!
• Always shop around. Prices can vary from vendor to vendor, and from day to day, so take the time to do some comparison shopping. Even saving a few dollars here and there can add up. Before you buy anything that costs more than a few bucks, look for a coupon, discount, or better price. For example, you can search Google for “NameCheap coupon June 2018” to find a coupon for a discount off the purchase of a domain name for that month. And many hosting companies have deals where you can get your first month of web hosting for free or cheap with a coupon code.
• Buy used whenever possible. A lot of people make the mistake of thinking they need to buy everything brand new, but sometimes gently used items make more sense. Why pay $500 for a brand-new desk for your office when you can get a very nice used one for $100? Sand it down and paint it, and it might look brand new at a fraction of the price.
• Don’t be extravagant. It might be a nice gesture to hold a Christmas party for your employees, but wouldn’t it be much better to invest in additional marketing that will help increase your bottom line, so you can offer your loyal employees with regular pay increases?
• If it doesn’t directly drive the company toward profitability, it can wait! Or you can make do with a cheaper alternative. For example, if you feel you must hold a party for employees, plan some inexpensive activities that can build team spirit rather than splurging on expensive food or renting a space for the par...

Table of contents

• Introduction
• Setting a Budget
• Sticking to Your Budget
• Hiring vs. Outsourcing
• Obtaining Capital
• Conclusion
• Resources