You’ve heard the depressing statistic: nine out of 10 startups fail. Of course, the reasons for failure vary from business to business, but according to a recent poll, lack of financing makes the list as the number-two reason. Smart entrepreneurs try to cut corners where they can and put any earnings back into the business, which can make a huge difference.
Here are 10 ways to save a few precious dollars in the first stages of your business and boost your potential for success:
- Scale your business idea back. Starting a retail clothing store or restaurant might be your dream business, but requires lots of capital to start out. Consider scaling back your idea and starting online or with one product line. As you build up your customers and your profits, you can your business to what you’ve always wanted.
- Keep your day job. You most likely won’t be able to pay yourself a salary during the startup stage. If possible, keep your current job or go part-time so you have enough to live on before the profits roll in.
- Find the hidden cash. If you’re really dedicated to starting your own business you’re not going to mind selling your boat or your comic-book collection. OK, you may not have these things, but you get the idea. Bootstrapping your business means finding any cash you have available.
- Move back home. If you’re not married (or even if you are), maybe you can persuade Mom and Dad to let you live at home for a while to save on living costs. If that’s not possible, ask a friend or sibling to rent you a room. Another idea is to rent out a room in your house to a college student and put that money into your startup.
- Don’t plow through the cash you have. You might want the best equipment money can buy, but there are other ways to get what you need without forking over a lot of money. As a warning, don’t skimp too much and get outdated technology. You’ll just slow down the progress of your business. Consider leasing office equipment instead of buying it outright. You’ll get the support you need to keep your equipment (and business) running smoothly and access the most current technology.
- Keep on top of cash flow. A simple accounting program combined with online business banking can give you access to daily reports that show you exactly how much money is coming in and going out. Download helpful apps to keep your business expenses organized.
- Watch your receivables. If payments take too long to come in, you’ll struggle to maintain the operating cash you need. Consider making clients pay c.o.d. or within 15 days after delivery. If you work on long-term projects, ask for half of the payment upfront. And don’t wait to follow up on late payments.
- Use barter. Trade your products and services for someone else’s instead of paying cash. For example, your Web design company might design a marketing company’s site in exchange for their handling your ad campaign. You can join an official barter exchange (search for them online), or make informal barter arrangements with other business owners. Make sure barter agreements are in writing and keep track of barter—you’ll need to report it on your business taxes.
- Hire frugally. You may have plans for a large staff at some point, but hiring independent contractors can help cut down on costs, since you won’t need to pay employee benefits. If you do have to hire, consider offering your first employees a stake in the company instead of a larger salary (talk to your attorney about this). Or look for college interns through local schools’ internship programs—it’s a great way to get your startup off the ground and give students real-world experience.
- Go green. There are many ways to not only conserve and recycle but also save money. Buy energy-efficient office equipment, print on both sides of paper, shop at consignment stores and flea markets for office furniture, and choose suppliers that sell green products when buying for your business. Refillable ink cartridges can damage your printer; instead, choose XL ink cartridges, which hold more ink than standard cartridges, and use less plastic than buying multiple cartridges.