Minimize Your Startup Costs with This Advice from Experts
Despite what it seems like on the news and across social media, you don’t need to be a billionaire to start a business. In fact, several well-known and highly successful entrepreneurs started with very little money:
- Jan Koum, founder of WhatsApp
- Howard Schultz, founder of Starbucks
- Do Won Chang & Jin Sook Chang, founders of Forever 21
- Woodrow A. Kantner!
It’s possible. It’s doable. Take this advice from experts in business, finance, and entrepreneurship to cut down on your startup costs so you can launch your enterprise without spending zillions of dollars.
PRIORITIZE WHAT’S MOST IMPORTANT
This may seem obvious, but as you calculate the cost of launching your enterprise it’s easy to slip into panic mode and include unnecessary items. What can you cut out?
- Paying for a service you can get for free
- Buying raw materials from “middle-men” or retailers
- Brand-new equipment
- Hiring staff to do work you can do yourself
When starting from scratch, especially when you’re in high school and may not have access to grants, loans, lines of credit, or a lifetime of savings, stay as lean as you can.
TAKE ADVANTAGE OF USED EQUIPMENT
Buying used is almost always cheaper than buying new. When you need equipment for your business (say, professional photography tools or a lawnmower), check online marketplaces or your local secondhand shops before investing in anything new. Being “professional” doesn’t always mean “spending lots of money on fancy equipment.” Places that sell used equipment and materials that are still in good condition:
Remember to check seller reviews! And, if meeting someone in person to buy their product, please practice smart personal safety measures, such as bringing a trusted adult with you, meeting in public, and only carrying enough cash to pay for the item.
OFFER ‘EQUITY’ RATHER THAN A SALARY
As bright and resourceful as you are, there might be things you simply can’t do yourself. And most people don’t want to work for free. Even if friends or family members offer to help you without pay, start practicing good business habits by offering them “equity” in your startup.
What’s equity, you ask? Investopedia defines equity as, “non-cash pay that is offered to employees. Equity compensation may include options, restricted stock, and performance shares; all of these investment vehicles represent ownership in the firm for a company’s employees.”
In normal human terms, this means that the “salary” for whomever you hire comes from your profits, once you start making them.
Learn more about offering equity here.
KEEP TRACK OF LITERALLY EVERYTHING
From the moment you have that brilliant spark of an idea, get yourself into the habit of keeping track of everything you do. This includes every penny you invest (like buying stuff or subscribing to services), every penny you bring in (once you do!), the dates and times of when things happen, the names and contact info for everyone you meet, and anything else related to your business.
Knowing where your money goes and how your business functions will help you see where you can cut costs and maximize profits. It also helps remind you of when you met that person who said they’d do some work for you for equity (see above) rather than cash.
CREATE MUTUALLY BENEFICIAL PARTNERSHIPS
Let’s say you want a professional to design your company’s logo, but they won’t take equity in return for their creative work. (Hey, equity’s not for everyone.) The problem is, you’re strapped for cash right now. You need that logo, and you love this artist’s work. What do you do?
Consider offering a partnership. In the case of your company logo, this can mean anything from crediting the artist on each page of your website and linking to their portfolio to offering to do some work for them. When everyone wins, that’s mutually beneficial.
TAKE ADVANTAGE OF SOCIAL MEDIA
One of the biggest advantages of being a young entrepreneur in the 21st century is social media! Not only do you have instant access to a worldwide audience, but you’re already growing up enormously tech literate. You don’t need to hire a social media team! You don’t need to learn how to make a TikTok video!
Social media platforms provide you with instant, easy, and FREE advertising. Once you start making a profit, you can consider using paid media on your platforms, but for now stick with simply getting your brand out there.
PLAN, PLAN, AND PLAN SOME MORE
While you shouldn’t get bogged down in the planning stage of your startup, do keep in mind that the more work you do ahead of your launch, the less likely you are to be hit with unplanned expenses. Avoid phrases like, “I’ll worry about that later,” or “I’m sure it’ll be fine.” Remember that fable about the ant and the grasshopper? Be the ant. Prepare yourself for every expense you can think of. Use this handy checklist as a guide. (As a young entrepreneur just getting starting, you won’t need to consider every single item on this list, but it’s a good start.) Then make sure you have some backup cash for emergencies.
INVEST IN YOURSELF
Taking the profits you make and putting them back into your company is a smart way to grow your business. Now that you can afford it, go ahead and upgrade your monthly webpage hosting subscription. Buy some paid ads on Google. Be a paid sponsor for a local event!
The big takeaway is to be prepared for nearly all startup costs before you consider launching. The fewer surprises, the better.
By “trimming the fat” on your startup expenses – and the expenses it takes to run your business in the first months after your launch – you’ll be able to take advantage of the profit you bring in. Be smart about the money you spend. Use your head, not your heart. Try to leave your emotions out of it. Then, enjoy your success!
Florida’s young entrepreneurs are encouraged to apply for a Kantner Foundation college scholarship. Learn more by clicking here!