Tips for Starting Business on a Budget
Starting a new entrepreneurial venture, even a tiny one, requires money. You need working capital just to operate, of course. And you may need capital for fixtures, equipment and machinery.Not surprisingly, then, finding this startup cash becomes a major challenge to beginning operations. But you can use several tricks to make starting a business on a budget easier.Starting a Business on a Budget Trick #1: Pick a Service BusinessThe economy is full of interesting business opportunities. Some ventures require more capital than others. Accordingly, one of the easiest and most powerful tricks you can use to start a business on a budget is picking an opportunity with low capital requirements.For example, if you start a professional service business like a consultancy or a personal service business like a catering firm, your capital requirements end up way, way lower than someone who starts a manufacturing business that requires million dollar pieces of machinery.Accordingly, look at service business opportunities if you're short on cash.Starting a Business on a Budget Trick #2: Start Really SmallIf you can start your new business so that, in the beginning, the operation is very small, you'll also reduce your capital requirements.Almost automatically, smaller operations require less cash and inventory. And smaller operations may operate just fine with more modest investments in fixtures and equipment.People don't like the sound of starting small. But oftentimes, these people miss the fact that with steady growth, even a very small operation quickly grows larger over time. For example, a $25,000-a-year service business growing by 25% a year, doubles in size every three years.Starting a Business on a Budget Trick #3: Operate Part-time in the BeginningAnother point related to the suggestion of starting really small: You may want to operate the business on a part-time basis, at least in the beginning. Here's why: Operating your new business on a part-time basis may mean that the business doesn't need to support you. You'll then be able to re-invest the profits back into the business.Nobody wants to work two jobs, obviously. But if you can juggle your schedule enough over the first six or twelve months to both do your regular job and to operate your new business, you may find that you've largely solved the cash flow problems that threaten many new small businesses.Starting a Business on a Budget Trick #4: Grow SlowHere's a financial reality that surprises many business owners. Not only does starting a business require capital. But growing a business requires capital, too.In other words, say you've got a good little operation going--one that makes you a decent living. But say you really want to double the size of the business. As a general rule, in this situation, if you want to double the size of the operation, you need to double the capital you've invested.Suppose you've invested fifty thousand dollars into the operation, for example, considering both the money you originally invested and the profits you've reinvested. To double the size of the operation, you probably need to double-down your investment to one hundred thousand dollars.How does this economic reality connect to you starting your business on a budget? Because growing a business means growing the capital invested in the business, typically you want to grow a business slowly.Starting a Business on a Budget Trick #5: Stay Lean and MeanOne final trick, or maybe suggestion is a better description: You want to stay lean and mean throughout the first months of operation and even after your new operation seems to have stabilized and cash flows seem predictable and steady.Regularly, business owners start out lean. And then, when the operation reaches a state of healthy profits, they become slightly carefree about cash flows. Perhaps a bit undisciplined in managing their working capital.But part of the business owner's job--one of the keys to profitability--is keeping a lid on costs and working capital.
About the Author
Stephen L. Nelson, a Seattle-area CPA, is the author of Quicken for Dummies and the publisher of the Small Business Plans and Steps to Starting a Small Business web sites.
Source: http://constantcontentsource.com