One of the greatest challenges you’re likely to face as a start-up is keeping your costs down and staying within budget. That said, ‘budget’ is a very subjective and fluid term when starting a business, as often we find our budget needs to expand to accomodate our growth – and in this vein, particularly if you have access to large scale investment things from venture capitalists things can get a little crazy.
Indeed, you often find startup founders celebrating to excess upon completing their first round of VC funding, looking at leasing fancy cars and air charter cost, on the basis they feel they have now ‘hit the big time’ and are making it… yet, the days of fancy cars and private jets are usually quite far beyond the initial stages of launching a business, even a high growth business, as this external ego stuff needs to come second to the needs of your business – and when you look at the fundamental needs of your business, it is to have cash in the bank in order to facilitate its expansion and react to unforeseen circumstances.
In this vein, it’s important to keep a lid on costs and not allow yourself to get carried away with spending your hard earned investment too fast, too soon, as many startups burn through money as if they only have a few weeks to spend it before it’s all gone.
In this article we’re going to look at a number of ways to help you keep costs down on your startup. However, before going into the tips let’s take a look at a fundamental principle – which should be your anchoring paradigm throughout everything you do.
The paradigm of creating value. See, in business, you are rewarded on the basis of the value you create for other people. It might feel nice to turn up to a meeting with a Mont Blanc pen and the latest iPhone, but in reality, what people really care about is the value you are able to provide for them; in the sense of what problems you can help them solve… meaning, they don’t really care about the external stuff, whether you are working in a tiny unit in the rough side of town or a swanky office in the heart of the city centre – you just need to be able to provide value.
Of course, there are times when people expect a certain standard, and giving off that impression of success is important to getting the contract – but – nine times out of ten, you can meet at a decent hotel and order a coffee… as long as what you propose is captivating enough to engage their attention, then they will be happy to do business with you.
Therefore, shift your paradigm from trying to impress with the image you create – and start focusing on the actual value you offer, based on your value proposition and unique selling point.
Now, let’s take a look at three tangible ways to keep costs down.
- START OFF WORKING FROM HOME
A common mistake many startups make is they feel the need to secure premises, even with a digital business.
This is understandable, as there’s an emotional distinction between those ‘playing at business’ from their bedroom and those with premises – but in reality, it makes no difference on the end-result. It does however, mean you are much more flexible and able to respond to situations with more agility.
A commercial lease tends to tie you down and eats away at your budget that could be better spent on product development or marketing. Of course, if you are going to work from home then you want to create a distraction free environment that is good for productivity, but there’s no reason most startups can’t operate from a kitchen table, garage, or even dorm room. After all, look at how Facebook got started!
- DON’T HIRE STAFF, JUST YET
The majority of entrepreneurs feel the need to do everything on their own, and this particular strain of perfectionism can strangle your success… as almost all majorly successful people know, in the business world, they want to hire the best talent – rather than be the best.
Property tycoons don’t strive to be the best plumbers, builders or electricians – they strive to find the best people to work for them, so they can leverage their efforts. That said, when you’re starting out, you need to be mindful of just how expensive ‘people’ are… and look into more flexible ways of getting tasks done.
Again, you don’t want to do everything on your own, but there are so many freelancers in the marketplace today that can help you on a flexible, project, basis – meaning there’s no financial burden on you paying them a salary for the next year.
It’s all about agility and being able to respond to the fluidity of your circumstances. Hiring people as freelancers ensures you can keep control of your cash flow, as you can adjust it accordingly, and it also offers more guarantee in terms of quality than employing someone – as if the output they provide isn’t satisfactory, you are in a much better legal position to not pay for it, or stop working with them… whereas, with an employee, there are many more legal headaches to contend with.
- STOP TRYING TO IMPRESS
As stated above, it can be very tempting to feel the need to impress, when starting out – though, this tends to come from a place of insecurity and not feeling good enough.
For this reason, it is much better to strengthen your value proposition and create something so captivating that you know you could walk into a meeting room, dressed as a clown, and have people pay attention to what you have to say.
This confidence is what people are looking for.
Have you ever met someone that depends on their symbols of status such as a fancy car, as a prop, that holds their self-esteem up. It’s as if, they feel so not good enough in themself that they rely on an external representation of success to hold them up. Don’t let this be you.
Nice things are great, but when you start depending on them, trying to impress your way to success – you’re not going to feel fulfilled and this level of insecurity is not what businesses are made on. You need firm foundations and the best way to have a firm foundation, in business, is not to go out and buy the best suit you can afford (though there is a time and a place for this)… it’s to create something of such value that people want to do business with you on the basis that you can help them solve a challenge they face.
Credibility, therefore, is not about how you come across – but the actual tangible value your business can provide. The great news about this, is that it means no matter what your current financial position, you can build a business today, from nothing and turn it into an empire – if you will just create enough value for enough people.