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Blog posts tagged startup costs
Spend wisely at the start
July 28, 2010
When starting a new business, the way that you spend your limited resources is critical to your chances of success. There are places where you can’t afford to scrimp, and there are places where you simply must not waste. You need to keep the chance of failure down by spending what you have very wisely.
- For a business with any risk, forming a limited liability company is a must. Then if the business goes down, loans and debts owed by the company won’t follow you. So set up a company by searching for “Company formation” on Google. It’s unbelievably cheap.
- There are other things to consider too. You need to keep all of your paperwork, including sales invoices and supplier charges, so that you will be able to do accounts and tax returns. But this doesn’t mean setting up a complex and expensive accounting system. It means employing a cheap book keeper for a few hours a week, or even keeping all of the paperwork in one tidy pile, so you or an accountant will be able to do the accounts when the time comes around.
- Registering for VAT, the Data Protection Act and possibly other specialist health and safety laws are other start up activities. Do these at the minimum possible cost and effort. These are overheads, not keys to your business success. You can nearly always find out everything you need to know with a few hours of research online. Everything possible like this should wait if it can.
- Don’t spend money on things that you don’t need yet. In a start up situation, tomorrow can take care of itself. The critical thing is to concentrate your money on getting your product right, making sure that your customers are happy, then selling like crazy. This is much more important than a slick operation. I’ve seen a number of people spend precious resources on preparing for massive success, only to have that success elude them because not enough attention was paid to sales growth.
- When you have a growing business with satisfied customers, then it’s the time to get better organised. As you grow, you will need to invest in systems to maintain quality, and you should also be able to drive down costs as a proportion of your sales. But all of that is for later.
It sounds easy, which it isn’t. However, following these tips will increase your chances of success. Good luck.
In summary:
- Spend the minimum on being legal and decent
- Focus on getting something customers want, and make sure that they are happy
- With that core in place, sell, sell, sell
- With sales growing strongly, invest in operations to maintain service and reduce costs
Chris Barling is CEO of ecommerce software supplier Actinic
Starting up on a very tight budget
March 11, 2010
I’d often dreamed of becoming my own boss but I lacked the start up capital to take such a huge financial risk so it stayed a dream. It wasn’t until I was on maternity leave that I realised I didn’t want to leave my son with someone else while I went out to work but I resigned myself to the fact that this was how it was going to be.
Then a week before I was due back to work I was made redundant. I was devastated. I was relying on the income after months of unpaid leave and I needed to start earning money again. The recession was in full swing, there was a lack of local jobs and I still wanted to stay at home with my son.
After a while I started thinking this was my opportunity to finally start a business. By this point I’d had some success sewing toys and shoes for my baby and had managed to get a few custom orders. At first I thought this was great but I soon realised the baby shoes were too time consuming to make which meant I wouldn’t make a profit. For years I had been fully immersed in the online handmade community and while I was researching other business possibilities I realised there was a gap in the market to help others in this area. I was seeing so many creative people trying to sell their handmade goods but not having much luck purely due to the fact that they didn’t know the best way to market themselves. With my past experience working in advertising, marketing and promotions and my first class degree in Design and Management I knew I could help.
But I had no money. I knew my target market was international and because my niche was crafters I knew where to find them. I joined Etsy, a handmade marketplace for small businesses. On Etsy you list items for sale under a shop front which you can design yourself. Etsy allows you to sell non-handmade items as long as you are providing a finished item which in my case is marketing and PR plans.
Start up costs
I set up my shop on Etsy for free. I designed a banner, logo and illustrations to list my products under. Listing was 20 cents an item and I listed 4 items to start with. I actually didn’t have to pay anything upfront as the bill for these listings would be due a month later.
Marketing on a budget
Despite not having much money I was able to utilise the internet to market myself for free. I use Twitter and Facebook to interact with other entrepreneurs and forums to chat with potential customers.
I set up a free blog with marketing tips and I decided early on to feature inspirational businesses in a series called Creativity Speaks! This helped to gain readers whilst becoming a resource for creative businesses.
Within a few weeks I had my first clients. One in Canada and the other in Singapore. Due to my low overheads, almost overnight I had a profitable international business.
I now spend my days playing with Lego, finger painting, exploring in parks and collecting things for our nature table. When my son naps I catch up on emails, when he goes to bed for the night I complete marketing plans. Being made redundant was the best thing that ever happened to me. Just don’t tell my old employers that!
My top tips when starting up on a budget:
- Use the internet. It costs very little to open a shop on Etsy, Folksy or other hosted marketplace solution. Even self-hosted websites are low cost these days which means low risk.
- Use social networking. It is free to use Twitter and Facebook to market your business. They are great for making connections and meeting other like minded people.
- Do as much as you can yourself. I designed everything myself from logo to banner and taught myself how to alter free blog templates using XHTML and CSS (I Googled!). It can be time consuming but it is worth it for a professional look.
Isa Maria Seminega, Noisette Marketing
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