Covering the costs youâll incur in turning your business idea into reality can sometimes feel like too big a barrier to overcome. Weâve also all read the stories about new businesses seeking large amounts of funding from the outset but starting a business doesnât have to be costly.
 When youâre starting up, no matter what your budget is, it never seems quite enough. When youâre starting out on a truly small scale it can be hard to know what to prioritise.  Youâll be juggling the time, money, skills and resources youâll need to invest in getting your idea off the ground. Starting your business on a limited budget allows you to start small and grow steadily, learn gain a wide variety of business skills, forces you to be more efficient with your resources and makes you think creatively.
Think lean
When you start to plan a business, itâs tempting to write a wish list of all the things you think you need to buy. Youâll be thinking about the equipment you need – maybe youâre considering renting an office or hiring staff to help you. Stop,  think and identify what is absolutely essential to purchase in order  to launch your business and start trading.Â
- Premises â You might be able to work from home to begin with (although make sure youâre aware of any permissions or restrictions). If not, have a look at co-working spaces where you can rent a desk instead of an entire office. If you want to sell products directly to the public, think about selling online instead of having a physical shop. You might even be able to find short term opportunities, like a pop-up shop, to help you test the market.
- Equipment â Perhaps you could manage with the equipment you already have. If you really do need to invest, look at the second-hand and reconditioned markets. And if you need to buy new, find ways of spreading the cost over a manageable time period, through leasing, for example.
- Staff â Employing staff comes with a huge overhead and responsibility, but itâs often essential to help you grow your business. Look at the roles that are necessary for the business at the start and make the most of flexible ways of working. Consider offering part-time roles or bringing in freelancers as and when you need them. You might even be able to call on the help of family and friends to begin with.
- Stock â Holding lots of stock means that you have cash tied up, which isnât ideal when there are other start-up costs to cover. Look at ways to manage stock levels, maybe through small manufacture runs or making your products to order.
Thinking lean doesnât mean cutting corners, but it might mean a bit of shopping around and looking at your business plan differently.
Manage cash flow
When youâre building a business, youâre juggling lots of different tasks, and itâs easy to lose track of things. But cashflow is something you need to keep an eye on every day, because you can quickly lose track of the money coming into, and going out of, the business. Itâs easy to say yes to a large order from a new customer, but what if you donât have the cash at hand to fulfil it? You might have had a really busy couple of months, but what happens if you forget to send out invoices? Managing your cashflow means you can carefully manage a small budget. Every business should:
- Send your invoices promptly and chase late payments â Late payments are a big issue for SMEs, so itâs important to send invoices promptly, make your terms and conditions clear, and chase payments as soon as theyâre late.
- Ask new customers to pay deposits or upfront fees â Thereâs no reason why you canât ask for this. Not everyone will be happy to, but itâs important you manage your own risks when selling to new customers for the first time.
- Pay your own bills on time â Not only does this help you forecast your expenditure, it also means youâre building your business credit score and reputation as a good customer.
- Spread costs â For example, you might be able to pay your insurance monthly by direct debit rather than in a lump sum.
- Track your spending and stick to your budget â Realistically your budget will require flexibility but if you find yourself over-spending on things, itâs time to revisit your forecasts.
It makes sense to get into these good habits from the start. They become part of your routine, and youâre more likely to stick to them as the business grows.
Focus on customer acquisition
Customer acquisition is about getting customers to buy from you, and when youâre first starting up you want this to happen as quickly as possible. Realistically few people will know about you, your company, and your products and services, but there are ways you can quickly start to generate sales.
- Target market – If youâve done sufficient research, you should know who your ideal customer is. By focusing on selling to those customers youâll not waste money on trying to convince everyone else to buy from you, at least not at the beginning.
- Ask for referrals âYour first happy customers are the best people to sell on your behalf, so ask them to refer you and your goods/services. This can be far more effective than spending money on a marketing campaign.
- Do your own sales â Not everyone loves selling, but your business relies on it. If you can be hands-on at the start, youâll learn so much from the customers you speak to. As the business grows you can look to bring in staff to help you.
- Go to the crowd â This might be virtually through a crowdfunding site, or in person at a pop-up shop. Think of the creative ways you can get in front of an audience.
- Create content â Content helps drive traffic to a website and raises your profile. It can be time consuming, but it enables you to tell your story and that of your brand, which customers love.
- Incentivise â We all love to think weâre getting a good deal. What incentives can you offer to draw your customers in, without it having an impact on your pricing?
Your business might need external funding, but whenever you can, find ways to generate revenue. It helps build value and working capital into your business from the start..
Do one thing well
Thereâs a danger that a start-up will try to be all things to all people, but when you have a limited budget you canât afford to do this. Instead, focus on doing one thing incredibly well.
- Make the business easy to understand â Customers will switch off if they donât understand your product or service. The initial idea for Twitter was incredibly simple: create a way for people to share brief âstatusâ updates about what they happened to be doing. It was fun, simple, and friendly and it took only a moment to understand how it worked.
- Strip away the bells and whistles âThe more complicated you make something, the more expensive it is to produce and the harder it is for customers to understand.
- Focus on what you do best â The denim company, Hiut, sums this up perfectly: âWe make jeans. Thatâs it. Nothing else. No distractions. Nothing to steal our focus. No kidding ourselves that we can be good at everything. No trying to conquer the whole worldâŚThatâs why we stick to just making jeans. Yup, we just make jeans. Thatâs all folksâ.
Youâll probably want to start introducing new products and services or exploring new markets further down the line. But by taking the approach outlined above will help you get the basics correct right from the outset and give you a solid platform from which to build from.Â
Go digital
Digital tools can help keep costs down and make sure youâre being smart about how you manage your business from the outset. Start-ups can benefit from myriad digital tools that didnât exist a few years ago, and some offer a free option for basic services.
- Websites and ecommerce â There are lots of pay-monthly options for creating a website and adding ecommerce capability. Most give you the flexibility of choosing from templates to get you started. You can also become more searchable using tools like Google business profiles.
- Mobile apps â Using tools such as AppInstitute you can create an app for your business without needing any coding knowledge.
- Social media â Look at competitors and speak to customers to work out which will be most impactful for your business.
- Collaboration â Digital collaboration platforms enable you to interact with your team â and clients – without needing to be in the same physical location.
- Feedback â Survey platforms enable you to gather customer feedback quickly and cheaply.
- Payments â Make it as easy as possible for customers to pay you. And if you shop around, you wonât always need to commit to lengthy contracts.
- Tracking and analytics â Google Analytics provides a wealth of tools to help you track engagement on your site and the impact of your digital marketing campaigns.
- Accounting â A good accounting package will help you with all aspects of running your businessâ finances. As your business grows you can add more users and more functionality.
The tools you need will depend on your business, so itâs always worth asking other business owners what they find most useful.Â
There will undoubtedly be times as you start and grow your business when you need some financial support. But why give away more equity than you really need to, or borrow more money than absolutely necessary, when you can apply a real bootstrapping approach to getting your business off the ground?
About the contributor
Lynne Robertson â Lynne is Enterprise Education lead at Santander, delivering non-financial support to businesses at all stages of growth.
Find out more – Â Santander Breakthrough
LinkedIn – Lynne Robertson | LinkedIn
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