Written by Allison Barnhill
If you are starting a new small business, chances are, you don't have a millionaire benefactor that is willing to invest $100K in your new business. Actually, 77% of small businesses rely on personal savings for their initial funding.* And, I'm pretty sure that most of us don't have hundreds of thousands of dollars just sitting around in a savings account to help fund a business. When I started Allison Barnhill Designs almost 15 years ago, I put $2000 in a new business banking account and jumped in feet first. So, today, we are sharing a few tips on how to start a small business on a budget.
1. Keep your overhead expenses as low as possible.
Overhead expenses are expenses that are required to run the business, but don't generate income. So, things like rent, payroll and advertising are considered overhead expenses. Let's tackle rent first -- 66% of small businesses start in their home. * The reason is because paying for rent and the associated insurance and utilities can be a hefty monthly expense. Try to avoid that cost until you need to hire employees or run out of space at your home.
Many small business owners don't pay themselves or limit their payroll expenses during the start up of the business. As the business grows, you should determine the minimum amount of money you need personally and then as your business grows your salary can too.
Spending too much on advertising is another trap that some small business owners fall into at the start of the business. You don't have to pay for advertising to grow your business. Organic growth via word of mouth and social media is actually better for your business - grow your tribe of supporters - and it's free! Share your knowledge via your blog or offer to blog for another business. You can also do interviews with other bloggers or even podcasts.
2. Grow smart, not fast.
When you start a business, you want it to grow, but the tendency may be to push it grow too fast, too soon. Scaling (or growing) too fast is the number one reason small businesses fail.*** Don't get me wrong, growth is a good thing. It's exciting to see your business do well. And, it is a nice reward for all of the long hours you put into the business. But sometimes growth can create challenges that can make your business not-so-successful. When you grow quickly, you also can quickly get into trouble with cash flow, customer service and even staffing. So, make a plan to grow your business slowly and try to be patient with growth.
3. Consider a partner.
Two founders, rather than one, significantly increase your odds of success.** Not only is it nice to have someone to lean on during the hard times, but you have another person to share the start up costs. When you are starting a small business on a budget, it's nice to have the financial and emotional support from a fully invested partner. Not only can you share day to day business responsibilities, but you can collaborate easily and call on each others strengths.
Overall, starting a small business on a budget can be difficult, but having a few tips and statistics in your back pocket will increase your chances of success.