September 21, 2014

How to Cut Down on Your Startup Costs

cut startup costs

A snazzy office, the latest equipment, smart employees and the option to complete a project on your time, and perhaps at the beach – many new entrepreneurs dream big when they plan their first venture. The only problem is that a new business is much more about hard work, sincere efforts and reduction of costs than the way they picture it.

It is important that you pay attention to how much you spend when you begin a new business. Spend just a little above your means and your dreams could fizzle. You need to keep track of all expenses and cut down wherever and whenever possible.

You may not be able to cut down on certain expenses such as trade licenses, business permits or any other aspect that directly affects your business. But there are ways that you can reduce costs and still attain your dream.

Cut Startup Costs Down

Start From Home

A well-equipped office space may feature high on your wish list, but it is best to hold off for now. Buying, or even renting, an office requires a considerable investment, which you had better avoid until your business starts to make money.

Start your business from home. This saves overhead charges, which makes it easier for your venture to break even in the early years. Designate a space for this and treat it the way you would treat a corporate office. If the space is appropriate, you may meet your clients there. Or you may book an office space such as a conference room for particular days or weeks.

Don’t Recruit Immediately

Starting a new business requires donning a number of hats and you have to handle different aspects of it at times. If you have a partner, he/she can lend a helping hand with the tasks.

While it is much easier to manage different tasks when you have a team of professionals, it also increases the costs. Wages can add to the startup costs quickly. If you are not comfortable doing something on your own, the smart thing to do is to outsource it to a professional. This way, you only pay for the work you cannot do on your own.

Rent Instead of Buy

If a moving business needs a heavy piece of machinery, but only for specific tasks that require its use for a few days in a month, a decision to buy it would be worthless. In such a situation, renting makes more sense.

The same applies to all new ventures. You can always keep off the purchase of big desks and ergonomic chairs for the present. Instead, you can rent furniture, fixtures and accessories for your home office and invest the money in something more fruitful. Moreover, this can also reduce your tax burden as leasing is deductible.

Get Free Advice

Knowledge and awareness of your industry is essential for any new entrepreneur. Connect and communicate with key people from your industry to keep yourself updated.

You can attend conferences, seminars and events. Get a mentor and use your social media network. Join online forums and keep track of what’s happening in the industry. You can often get the best advice for free when you connect with the right people.

Ensure Best Value for Money

The cheapest option often doesn’t guarantee the best value for your money. Don’t opt for the cheapest supplies or outsourcing services. Pay equal attention to the quality and the cost to get the best value for your money.

Here’s an example. You can get fancy stationery for your new business at a high price. Or you can get plain stationery for the lowest price. In the first case, your money is wasted. In the second, your business image becomes poor. The right thing to do is to get simple but good quality stationery at a reasonable price.

Use Existent Resources

You need not set up a separate infrastructure to begin a new business nowadays. You can tap into the resources that already exist. This can save a considerable amount of money.

If you plan to sell something online, you need not create a website with the option of online transactions as soon as you begin, though it is often a good idea to do so. You can choose to use existing platforms for online transactions temporarily. You may have to pay for it, but it is money well spend.

Don’t waste your money on superfluous things that have little to no impact on your core business when first starting out. Instead, invest it in avenues that will benefit your endeavor in the long run.

Cut Startup Costs Down Photo via Shutterstock

21 Comments ▼

Richard White


Richard White Richard White works as an editor at Yellow Brick Path. He enjoys varying his work and researching new and different approaches. He shares an interest in career counseling and recruitment.

21 Reactions

  1. And don’t forget the phrase “Penny wise, pound foolish”. While you may initially do lots of things yourselves to save money, as the business grows you’ll need to outsource or hire to offload certain tasks so you can focus on the most important aspects of the business.

    • I do agree with you Brady.We just need to wait for the right time to come and prepare both financially and mentally.

  2. Richard – These are all very interesting and useful ideas. Most founders underestimate the time and money it will take to start a business. By watching out for start cost with these tips they can avoid getting stuck with higher cost at the beginning.

    I advise clients to reduce cost in general with the framework of Eliminate -> Rent -> Share -> optimize. Eliminate the expense if possible by not buying. If you must have it rent instead of buy. If you must buy share it with someone to reduce the cost. Finally, if you must own it yourself try to optimize its use.

  3. Great tips for start-ups to cut cost. Start from Home is the most important point here, because most of the start-up, nowadays are building expensive offices before they even start to make money.

    • Yes, Prashanth. It is a show off sometimes. People want to have a fancy office and a fancy workstation to impress clients. However, that does not work any more and does not hold any importance to those who mean real business.

  4. It is interesting that you do not mention serviced offices, shared offices or virtual offices as lower cost alternatives for startups that want to have a prestigious office address without the cost of setting up a traditional raw office space.

  5. It’s always great to see posts about how small businesses and startups can save money. Cash is the most valuable asset for a startup. Thanks for a great article on how to conserve cash.

  6. Although these are great tips, Richard, I think the same tips apply for small businesses as it does for startups. Even after you begin to make money, you can feel pressure to look like the bigger companies or spend more money to keep pace with your competitors.

    I’ve seen some of the most minimalist blogs generate thousands of dollars of revenue a month. Alas, I’ve also seen swanky blogs that haven’t been able to generate a cent.

    We need to be wise with our dollars – on all levels – and find what works best for you. Bells and whistles are no longer the guarantee to success. Smart money management is the true success.

    • Absolutely Shannon, it very much applies to online money making business and an online startup.

      Doing best with the least is all about the skill one has and the effort one puts into.

      I am sure you have a great business that is running successfully, because you are bang on target.

  7. Very useful advice Richard. Starting from home is a great option. The cost involved in maintaining an office with its overheads and everything can be quite a bit. This cash can be handy elsewhere. Proper planning is vital.

  8. @ Richard, undoubtedly a good post.
    1. Start From Home – Is this legitimate to do commercial activities in residential areas?
    Option – As suggested above, Shared office may be the good option, even virtual or mail box addresses are not advised.

    2. Don’t Recruit Immediately – Should we consider ourselves “Jack of All Trade” Remember the ending of this proverb – Good for nothing.

  9. Although the issues outlined above can be handy but as your business grows, so grows your costs. You can save some money in the initial stage if you are knowledgeable and skilled and can handle some work on your own. But as soon as your business starts rising and you feel the need of helping hands that is when your business costing starts to rise. The idea is simple – You have to spend more to get more.

  10. Thanks for your ideas. I too think working from home is great for start ups. (…) and treat it the way you would treat a corporate office (…) also means you should behave as if you were in a corporate office. So stay focused on your business instead of cleaning the dishes, quickly watch the news and test the new Xbox game from your son. Otherwise it´s better to rent some office space.

  11. Dr. Sheriff Alabi

    Yes, quite sensible; because every business decision has financial implications.

  12. Great advice Richard, many new businesses fail because owners quickly escalate costs, such as leasing BMW’s. There are lots of areas you can remove costs from your business but you need to be savvy to do it without appearing cheap. The main thing is to research anything you are about to spend cash on to see what the alternatives are and once you have an alternative in mind, research and test it first.

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