Do you want to start a business but afraid you don't have enough money?
Starting your own business can be a rewarding experience. But with most new businesses taking a while to turn a profit, you may be worried about starting out on a budget. It's especially hard if you are bootstrapping your business or are on a short runway as a startup.
We are here to help you build your company frugally. Read on to find out how to start and grow a business on a budget.
Decide on a Business Idea
To do this, consider what you enjoy doing, where your skills lay and what equipment you already have.
For example, say you're a trained seamstress and have your own sewing supplies, IT expert or plumber. You could start your own tailoring business doing alternations and bespoke garments, open up a computer repair business or provider plumbing services.
When looking for that spark of business inspiration, always play to your strengths.
Hone in on Research & Planning
Once you've got your idea, the next step should be some solid, in depth planning and market research. Market research is gathering information and data about the industry/market you're entering. This will include:
• Who your potential customer bases are
• Who the competition is
• The location you want to target
• The needs of your potential customer bases
The great thing is, market research can be cheap and it's going to give you a huge boost towards success. Here's a quite step-by-step guide on how to do market research on a budget.
Research Your Potential Customer Base Characteristics
Start off with some key questions to ask. You want to know, how much they do they earn and where are they located? You also want to know what age, gender, occupation range will make up most of your demographic.
You should find out what do they like/dislike about the current offerings on the market? What do they think are the current market issues that aren't resolved yet? What would they like to see on offer and how much are they willing to pay for these resolutions?
Consider offering the chance to win an gift certificate for a popular brand. This will motivate people to fill out your survey.
It's also a great incentive to get contact details, so you can start compiling a marketing list. Or, ask for their email address anyway, and offer them the chance to sign up to your newsletter. Email marketing will be key to gaining and nurturing your leads.
Research the Status of Your Chosen Industry as a Whole
It's not enough to simply know who your competition is. You need to conduct thorough research into them. Find out things like what they're offering and what their price points are. Also, find out where their offerings/services are falling short for customers.
You can do this all online for free. A thorough search on their websites, and third party stock websites is a good place to start.
Also check out their reviews. Don't look at the ones on their website alone, as these will be cherry picked to boost their image. Check out non-biased review sites to find out what the true customer opinion.
Negative reviews are disastrous for a company. But in this instance they're your best friend. Bad reviews will tell you what your competition are lacking, and where they need to improve. It could also help you find your niche or your USP.
To stand out from the competition, you'll need to offer your customer something unique. It's vital that you understand Digital Customer Experience Trends. You can read more now. Say your competition only offers the standard 3-5 working day delivery times. Your USP could simply be offering 1-2, next working day, or pick your day delivery.
Be original, and offer something your competition aren't. You need to give your target audience a reason to choose you.
Start Small
Without a big budget to match your big idea, you should start small until you have the funds to expand.
Starting off small keeps your expectations in line. It avoids the temptation of spending out on things you don't need right away. It'll also help keep you keep your finances stable, and avoid amassing excess debt.
Call on family and friends to help spread the word. Set up a business page and share across social media. Think about flyers, going door-to-door and other cost-effective advertising methods. You can't do it all for free, but you can still get the word out there without breaking the bank.
The best place to start is by building a good reputation, and focus on growing that. Aim for paying customers, and doing a good job. Numbers are great for profits, but at the start freebies could land you in unnecessary debt.
Keep the Cash Flow Going
Don't overburden yourself with seed money at the start. When you're on a limited budget, you need to keep your debt burden as small as possible. Don't take out extra loans.
It's okay to dip into your personal credit card here and there at the very start, but have a plan to pay it off. You don't want to end up saddled with climbing debt and sky-high interest on top.
A good rule to follow is don't spend money you aren't prepared to lose. It's better to have a steady cash flow than a huge lump sum injection. Otherwise the temptation to spend big will be too much. Keep a tight leash on your expenses.
Consider each business expenditure with planning a care. When it comes to updating equipment, it may be better spent on marketing and advertising if you can deal with the machinery and supplies you currently have.
Reduce the Overheads as Much as Possible
Keeping overheads as low as you can is a good rule of thumb in any business. But when you're starting up on a budget it's vital. Accurate spending records are a must, and make note of all expenditures in minute detail.
Resist the temptation to spend on outsourcing, equipment and labor to start. Always work out what you can do yourself before you think about hiring someone else.
When profits allow, try to set aside 50% of those profits to start building a back up fund. This is for any emergencies to start. As your business grows, you can start reinvesting it to expand.
There are no guarantees to success, so it's about being smart with your money when profits allow it. You might have big dreams, but you can only grow as much as your funds can handle it.
Starting Your Business on a Budget
As you can see, starting a business on a budget doesn't need to be difficult. It just takes sensible planning. Doing your business research and keeping your overheads low will go a long way to helping you find your feet.
If you found this article on low-cost business launches to be useful, be sure to check out our other blog posts. Visit the Startups section of the Bootstrap Business Blog to learn more about how to start a business on a budget.
