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Put Your Wallet Away

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The first thing most people do when they decide to start a business is start spending money. DON’T! Avoid spending at all cost.

How to avoid spending

1) An obvious first is to use your home as your business location.

2) Try getting by with office supplies you’ve got laying around the house - vs. running out to Office Depot or Costco to stock up.

3) Do you really need business cards? If someone needs your contact info, can’t you just write it down for them?

4) Use furniture that you already own. Even if it’s a fold out table - it’s still a table.

The only thing you might need to spend money on is a prototype.

Prototype

If you are selling a product, you may need to spend a bit of money building the first version of your product - your prototype.

Don’t go crazy though.

For instance, say you’re selling ’scrapbook pages’. You may try rationalizing things - like going out and buying a die cut machine to help build your prototype. DON’T!

Get creative - grab a razor blade from your garage and cut out the shapes for your prototype by hand.

Profits before expenses

Once you have your prototype, take pictures of it and upload them to your website. Also, take your prototype around to local craft stores.

Get an order for 500 pages, and then use your profits to buy the die cut.

If you can learn to purchase things only AFTER you’ve made sales, you’ll be light years ahead of most startups.

Cash flow

Cash flow is a business term used to describe how much money is coming in and going out of your business.

When you start your business, you’ll likely be cash flow negative - this means you’re spending more money than you’re making.

But if you don’t spend anything, you can become cash flow positive very quickly. This is a huge benefit of staying small.

Make it a game

Learn to spend as little as possible. Make a game out of it. See how little you can spend while starting your business.

Advantages

Starting out frugal helps you:

1) Face less risk should your business fail.

2) Stay thrifty throughout the life of your business

3) Weather the storm - should you ever experience a lull in sales.

Summing up

Make due with what you have. If you absolutely don’t need it, don’t buy it.

Sunday, April 6th, 2008 at 9:19 pm and is filed under Finances, Micro Essentials. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.