Most entrepreneurs don’t attract big bucks from venture capitalists or angel investors. They bootstrap.
Bootstrapping involves using personal resources to start a business, not investor funds or big bank loans. As revenue grows, money is put back into the business to optimize and scale operations.
Bootstrapping lets first-time entrepreneurs avoid the challenges of convincing people to give them money without a track record. It also means they won’t lose their house if things go downhill. However, when you’re operating on a limited budget, it’s hard to know where to spend. Scrimp in the wrong place and it could hold your business back, but spend too much and you could go under before your business has a chance to blossom.
Every industry is different, but when it comes to major startup costs, these are the best ways to save money while bootstrapping your business.
There are a lot of clever ways to save money on office space; from sharing it to renting it out on the weekends. You may not even need an office space at all. While office space is essential in some industries, many entrepreneurs can get by running a home-based business.
Home-based businesses save money on rent, utilities, and commuting costs. With remote work growing more common, it’s no longer unusual to Skype into meetings. You’ll still want a professional setting, especially if meeting clients at home, so invest in a desk, chairs, and desktop computer, and set up a free business phone number using Google Voice.
There’s one problem with a home-based business: no space for inventory. You could outsource warehousing and distribution, but before contracting with a third-party logistics provider, consider whether dropshipping would work for your business.
Instead of buying inventory and paying a 3PL provider to manage it, dropshipping businesses fulfill orders by purchasing items from a third party to be mailed directly to the consumer, dramatically lowering overhead costs. Small, shippable, and non-urgent products like apparel, home décor, and cosmetics are ideal for a dropshipping venture.
The right tools make your business more efficient and profitable. If software can handle time-consuming tasks like payroll, inventory management, and sales reporting all in one integrated package, you don’t have to spend your own time or hire staff to do it.
Since the right software and hardware can save a lot of money, it’s worth investing in quality products. However, reserve the high-end business management tools for specialized needs, and use free or open source options for word processing, graphic design, and other basic computing.
One of the biggest challenges new entrepreneurs face is the costly process of hiring staff. In an effort to save money and avoid the administrative hassles of hiring employees, many business owners clock long hours trying to manage everything themselves. However, there’s a lot of tedium involved in running a business, and if you’re spending all your time keeping the books, you’re not out there making money.
Instead of passing up on staff, consider remote employees to save time, money, and stress. While it’s possible to hire full-time remote employees, contracting with a virtual assistant agency is a better option for small businesses. When working with an agency, rather than an individual, you’re not responsible for insurance, payroll, and other employment logistics.
Bootstrapping might not be the glamorous entry into the world of entrepreneurship you imagined, but it’s a smart way to start a small business. Rather than going all-out on startup expenses, spend your money where it counts. As your business grows, you’ll be able to reinvest and scale your business profitably.
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