Updated: Oct 3, 2019
Ever heard the saying “You must spend money to make money”? I have, countless times! And while it’s true, it remains unclear as to how MUCH money should be spent when starting a business. There is no prescribed amount, as each start up's spend will vary depending on the experience of the current team and the type of product or service being offered.
During the early stages of setting up a business, it is wise to keep spending to a minimum, even when the business is proven to be viable through a business plan, gaining followers or even generating sales.
Here are some tips to keep spend to a minimum when starting up:
1. Invest in yourself - Instead of spending large sums on professional services, invest a little bit of time and money to learn how to do some of the things required to run your business. Not only will you spend less, but you will have learned a new skill and have a better understanding of this function in your business.
2. Get at least 3 quotes - It is wise to compare offers and prices from at least 3 different suppliers prior to committing. When doing so, be mindful of a supplier’s values and work ethic and have a clear brief of what is required as sometimes the most cost effective option is not the best solution. Often suppliers agree to a free trial run before any commitment is made, if you find no free trial is offered, don’t be shy to ask for one!
3. Research, research, research - Do the market research yourself. Go to where your target market shops (physically or online) and observe, research the competition and what they are offering, talk to your customers and scour the internet for as much information as possible and make note of everything that is relevant. Not only will you spend less on agencies, you will have a better understanding of your market and on which areas of the business you should be spending on.
4. Low cost testing - If your business is a bricks and mortar business, testing the idea at local markets and fairs is a more cost effective alternative to spending large amounts of money on rent, stock and staff. Get involved in the testing, not only will you spend less on staff and expensive agencies, you will experience first hand what it is like to run the business and be in a position to receive feedback directly.
5. Freelancers - A quick internet search returns a number of freelance sites that pool together talent that are experts in their field from all over the world. Pricing is set by the person posting a job, either by setting a budget (or “prize”) or allowing freelancers to bid for jobs. A good site will make freelancer CVs or portfolios available, include NDAs for jobs posted and hand over all rights of work completed.
In the early stages of starting a business it is wise to be as cost effective as possible. This is especially important if the business is yet to generate any revenues. While no business was ever built by one person, initially, the founder should be involved or at least have a good understanding of how each function of the business works.
Inherently, this helps keep costs to a minimum when starting up.