Why should you reduce your startup costs? The less you spend on the initial expenses, the more funds you can allocate to your marketing budget, and also to your working capital. By reducing your startup costs, you can stretch your dollar to cover so many other expenses and also increase your working capital.
Also, angel Investors love the idea of a low cost startups. Here are a few methods that you can use to reduce your startup costs.
1- Evaluate Your Startup Needs
Grab a pen and paper and list everything that you need. This list should include office space, garage or warehouse or storing inventory, computer systems, communication systems, furniture and equipment, transport and so on. Create a table with three columns in it, for Fixed Costs, Deferrable Costs and Costs That Can Be Eliminated. Go over your master list and see what you absolutely cannot avoid, what you can defer for later and what you can do without. Put the relevant items in the three columns and then compute your startup costs. You’ll be surprised at how much you can save.
2- Lease What You Need, Don’t Purchase
From the list of your absolute needs, evaluate which items are the most expensive. See if you can lease these items for 6 months or one year until you are sure about your business. Items that you can lease for short or long periods include office or factory equipment, furniture, computers and several others. There’s a benefit to leasing as opposed to purchasing. You can get a tax write off on your leasing expenditure, saving you precious dollars.
3- Opt For Monthly Payment Schedules
Insurance companies and banks usually ask for their premiums and charges upfront. Check with them if you can pay your charges every month instead of upfront. Note that in order to enjoy the monthly payment option, you may have to pay a nominal fee. Even though you have to pay this fee, it’s better to avoid paying a large amount upfront, which might drain you of valuable funds that can be deployed elsewhere.
4- Talk Your Way Out Of Paying Security Deposits
You’ll need to pay up several months’ charges as upfront deposit for utilities such as gas, cable, and electricity. Here’s where you can use your personal credit history and your partners’ credit history to convince utility companies not to charge you the deposit. You can also try and obtain letters of good will from local businesses, politicians or even your mayor. Showing good business credit in terms of investment can also help convince these companies not to charge you the deposit.
5- Buy Equipment and Furniture Second Hand
If you’ve decided to lease a few items and to buy a few, explore buying them second hand instead of new. You can buy used items that are in good working condition. If you’re not sure, get the items looked over by experts. Test any furniture for defects, stability and looks before you buy it. While you’re at it, explore the certified used equipment programs that some furniture stores like Distinct Homes furniture sponsors. You can get great deals this way.
Or if you prefer to buy new, one great way to keep startup costs low is working with wholesale companies such as Schaefer Systems International which can help you save by buying in bulk.
6- Check If Suppliers Will Accept Deferred Payments
When you stock your initial inventory, you’ll have to put out considerable amounts. Buy goods from vendors who’ll defer payments for a few months. These vendors might charge you a margin for this but it’s still worth it. Check out a number of vendors before you stock your inventory to get the best deal in terms of price, delivery, deferred payments, replacement, and restocking. Establish trust and credit; many vendors will be willing to cooperate to enjoy long-term business from you.
7- Negotiate Prices
Negotiate prices for everything you buy or get done at your office. If you want to set up workstations for your staff, negotiate the best deal you can with the unit manufacturers. Get your office carpeting from wholesalers and negotiate pricing with them as well. Always pick the goods with the least pricing, and then negotiate further on it. The more you negotiate, the more you’ll be able to save. Every penny you save is an asset you can use later for your business.
8- Cut down Communication Costs
Take full advantage of the rising influence of the internet in every sphere. Don’t invest in bulky fax machines, copiers, printers, complicated office phone exchange and so on. Get the best internet connection that you can afford and use email for all your communication. Cut down paper costs by printing only contracts and legal papers. Use free IP to IP communication software such as Skype to set up calls with clients. Use a free email service such as Gmail for your official communication. Use the many free web conferencing tools that are available now to
connect with people all over the world.
9- Ask for Help
Never feel shy to ask for help. You never know who’ll have the wherewithal to do you an important assistance. Tap your friends to see if they can pitch in and help you do the marketing or design Ads and promotions. Ask your family to pitch in with handling calls and taking down orders. By using readily available and willing labor, you can save yourself the cost of hiring people, until you are sure you can afford to hire them.
10- Use Things from Your Home
The first place to go through when you’re thinking of furnishing your office premises is your home. If you have an attic, go through stored items with a fine tooth comb. Are there coffee tables, shelves, desks and chairs that can be used in office rooms? Grab them. Are there spare area rugs that you can use in your office cabin? Get them out and air them. For example, you could get things such as a coffee percolator, a water cooler, paintings and objects de art, plastic and paper plates and a great many other items that you’ll need.
The Bottom Line:
Cutting startup costs is a must to give your startup a strategic boost right at the threshold. I hope, the above 10 tips will help you save a lot of costs which you can use to take your business to the next level.