When you start a business, cash is usually at a premium. Whether you’re financing the effort yourself, borrowing money or taking on investors, every penny counts. And, you encounter invitations to spend money at every turn.
Making smart decisions about your investment requires giving serious thought to which of those expenditures are truly necessary to move your business forward, which are indulgences and which new entrepreneurs tend to make by default, without truly considering which category they fall into.
Some common expenses that may not be necessary:
While the nature of some businesses requires a physical location, many successful start-ups today operate out of the entrepreneur’s home. If only occasional meetings are required, an office sharing arrangement or rentals by the hour may be far more cost-efficient in the early days than renting office space that you’ll only need for a few hours each week or less.
Business Cards and Letterhead
Business cards aren’t a significant expense, but they’re one that is often incurred without any real thought. Once upon a time, having a card was necessary to show credibility and to network effectively, but in many industries those cards rarely if ever come into play today. And, in an electronic world, most written communication takes place via email, not U.S. mail. If letterhead is required on rare occasions, chances are that you can print out your own in just a few minutes.
Equipment and Technology
Whether you’re working from a home office or renting new space, think hard about how thoroughly you need to deck it out to get started. Some equipment may be necessary, but you probably don’t need the latest and greatest to get started.
As with equipment, some outside services may be required. But, make sure you evaluate each in terms of its immediate importance rather than hiring based on “every business should have” type assumptions.
According to a recent study, it takes an average of $30,000 to get a new business off the ground. Making your investment last until your business is generating enough revenue to be self-supporting can mean the difference between success and failure. With that in mind, stop and think before you spend. Resist the urge to invest in trappings that make you feel official or enhance appearances but don’t do anything significant to move your business forward.