If you’re looking to set up a business on a shoestring, you couldn’t have picked a better time, as today you can benefit from the hugely reduced cost saving tools offered by advanced web technologies, automated systems, and a global market of cheap freelancers just waiting to receive your outsourced tasks.
This means that today, no matter what your budget, almost anyone can set up a business on a shoestring. In this article, we’re going to look at some ways to reduce the cost of setting up a business and help inspire you to take immediate action in turning your idea into a reality.
1. BUSINESS REGISTRATION
There are many different ways to register a business, in fact, you can set up as a sole proprietorship with barely any formal requirements other than basic bookkeeping and reporting your profit and loss to the IRS.
If you’re going into business with someone else, you may want to consider a New York LLC which is a specific type of partnership that offers more protection to each member, which is helpful given the fact in most partnerships each partner is held responsible for the debt of the partnership should the business not turn out so well.
There’s also the idea of setting up a corporation, though this is a much more complex and expensive process, usually limited to the later phases of start-up, unless you are seeking investors at an early stage.
2. BUSINESS SPACE
A common mistake many startups make, in the early days, is that they feel the emotional need to secure premises in order to feel like they have a ‘proper business’, yet this is often a financially disastrous move, as the onerous monthly cost of a lease can severely cut into your cash flow.
For this reason, the key advice offered to most startups is to start off working from home, even if you have a few staff, it can be much more cost effective to utilize one of the rooms in your house as a makeshift mission control for the launch of your business - and as you start to get traction, and bring in revenue, the perfect office can be just around the corner. In the alternative, look into working from a flexible space that doesn’t tie you into a long-term contract as one of the most important features of a startup is their ability to be nimble and agile; the last thing you want, therefore, is to be tied into a long-term contract in terms of office space.
3. DON’T HIRE STAFF
In a similar vein, try to avoid hiring staff in the early days. If you desperately require the skills of someone else, then you could look into a partnership agreement (such as a contra deal which is essentially a “you scratch my back and I’ll scratch you back” arrangement) or offer them equity in your business.
That said, you don’t want to be giving away too much equity at an early stage, as you will dilute your share, therefore the best thing to do, in today’s world is head onto one of the freelancing platforms and find an appropriate freelancer to handle key tasks.
The benefit of this is that you can source someone from a country with much lower cost of living, therefore, they’ll be happy to undertake the project at much lower rates than what you might pay locally. Furthermore, you are not tied into fixed term contracts or subject to onerous administrative responsibility… after all, the last thing you want, as a start-up is the prospect of having to fire someone for under-performance, then them taking you to a tribunal etc.
Keep life simple, and outsource, rather than hire staff as it makes much more sense in the early days when setting up a business on a shoestring.
Business On A Budget
In summary, be sure to pick out the right company structure for your type of business. Think carefully about registering a corporation as it can be a very burdensome administrative process, though if you are going into business with another person, it pays to consider a LLC as this will offer you much needed protection, should there be a disagreement.
Then, whilst it’s tempting to go “office shopping”, try to resist the urge to splurge on commercial property and work from home, or at the very least, in a flexible space that means you can cancel on a rolling monthly contract.
Finally, try to avoid hiring staff, as you will have a much easier administrative life and things will likely be much cheaper, and certainly more agile, to instead work with a freelance team.
I hope you enjoyed this blog post about how to set up a business on a shoestring budget.
Interested in more articles about lean startups?
Read Related Resources:
• Key Ways To Save Money On A New Business
• How To Start Your Side Hustle
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