Some estimates from the Small Business Administration say that 627,000 new businesses start every year.
Is your SMB, SME, solopreneur venture, side hustle, or startup about to be one of them? You may have a great business idea, but you’re on a tight budget. Many find starting small businesses to be rewarding. It can also be nerve-wracking as you try to manage your cash flow.
Read on to learn the 7 top ways to start your small business on a tight budget.
1. Create a Small Business Budget
You need to outline your business budget. You are going to become a big fan of spreadsheets because they make the job much easier.
You will need to create three spreadsheets: a startup budget, operations budget, and profit and loss statements.
Your startup budget outlines all of the costs to start a business. This includes legal fees, the purchase of equipment, employee hires, and office space. Think of every expense you’ll need to make before you open your doors.
The cost of operations spreadsheet will show how much it costs to run your business each month. This is usually in the form of fixed monthly expenses, such as payroll and rent. There are also some annual expenses. License renewals fall in this category.
Your profit and loss statements will tell you how profitable your business is. You will document your income, subtract the cost of goods sold, and other business expenses.
This spreadsheet will let you manage your cash flow and maintain profitability.
2. Create the Right Business Structure
Many people would suggest starting out as a sole proprietor when you start your business. That is because it doesn’t cost much to do.
Depending on your industry, it could cost you more in the long run. You want to invest in the right business structure from the outset because not doing so could leave you personally liable for any errors.
Let’s say that your business sells products online. Someone tries your product and sues your business over a defect that caused an injury.
As a sole proprietor, your personal assets are at risk because you and your business are legally the same thing. You could lose your home or personal banking accounts if you were to lose that lawsuit.
On the other hand, you could file as a single-member LLC. That would create separation between you and your business. You can even start registering a business for free using certain apps or websites now.
3. Learn to Set Money Aside
It is easy to spend money before it even comes in. Smart business owners know that if they want to get ahead, they need to have financial discipline.
You want to create several separate bank accounts for your business. One for your expenses, one to set aside money for taxes, and one to save for hard times.
It won’t be easy to do at first because you’re trying to take care of your personal bills too. Start with small percentages to build up the habit. As your revenue grows, so should the money you set aside.
4. Invest in the Right Places
Your most precious business asset is your time. That is also your competitive advantage if you use it wisely. Is your time better spent on doing everything yourself or by focusing your time on closing and serving customers?
That is the essential business question. Business owners think that by hustling and doing everything themselves, they’re starting their business the right way. They save money, but they wind up working 80 hours a week and burn out.
You want to invest in ways that will free up your time. Your free time can be spent on growth, not minor details. That’s where outsourcing becomes a smart business decision.
One such example is to invest in small business payroll services. That will save you hours each month, not to mention keep your business in compliance with labor and tax laws.
5. Develop Repeatable Systems
The more you can automate, the better. The most efficient businesses are the ones that have a system for repeatable tasks. Some businesses have learned to automate many of these tasks or outsource them.
What automation allows you to do is to create systems that are repeatable. That will help you scale up your business faster.
6. Don’t Be Afraid to Fail
Fear can destroy your small business. Business owners are so afraid of failing or making a mistake, that they overthink every decision. That often leads to no decision and no action at all.
Of course, you don’t want to fail. However, you can’t let that get in the way of running your business. Don’t allow yourself to overthink decisions.
Instead, set up a system to make swift decisions. Some business owners get all of the information that they can and give themselves 10 minutes to decide. They are sure to base the decisions on data.
Will you make mistakes? Yes. Know that they will happen. Most mistakes aren’t going to destroy your business.
7. Exceed Customer Expectations
Business owners tend to focus on the wrong things. They can get sidetracked into designing the perfect logo or building the perfect website.
That can distract them from the most important thing in the business. That’s delivering the incredible service to the customer. Every single day, you need to make sure that you are exceeding customer expectations.
Don’t get sidetracked by minute details. You need to ask yourself how you can do better by your customers. That’s how you’ll get referrals and testimonials to build off of.
Starting Small Businesses the Smart Way
Thousands of people are starting small businesses this year. Many of them fail because they overspend and don't save for a rainy day.
You want to manage your cash flow and you may be tempted to bootstrap your way to building a successful business.
That could lead you to take on all tasks yourself, leaving you with little time for anything else. At the end of it all, you need to focus on your customer. Make all of your business decisions based on the customer.
When you do that, you’ll free up your time to deliver high-quality service. That will lead to more clients and a thriving business.
Click on the Startups tab for more helpful tips just for startup businesses. It will help you in starting small businesses on a frugal budget successfully.