The stats paint a grim picture for entrepreneurs: 90% of start-ups are bound to fail. And one of the biggest reasons for failure is the lack of cash flow to manage daily activities. Start-ups herald the beginning of an exciting and challenging time for entrepreneurs. The prospect of providing breakthrough technology, products and services in an existing market, or for an untapped market is highly enticing. Unfortunately, start-ups are like vacuum cleaners to your bank account.
In the infancy stages, money flows at breakneck speed – in the wrong direction. The costs of getting a start-up running are exorbitant. These include capital for inventories, equipment, machinery, vehicles, et al. Other costs include employees, rental, liability coverage, marketing, advertising, R&D, and a veritable glut of other expenses that you probably never thought possible. While the start-up finds its feet, it’s important to manage costs as effectively as possible, without hampering investment and spending needed for growth.
Investing in affordable technology
Start-ups operate across the spectrum in high-tech industries, low-tech industries, and service -related industries. Technology is costly, especially new technology. The objective in all instances is to maximize productivity while minimizing costs. If a big investment in technology is likely to yield outsized returns over the long term, it may warrant investment. Fortunately, businesses can reduce expenditure on technology by encouraging team members and stakeholders to bring their own technology to work, or on the job with them. This reduces the need for expenditure on PCs, desktops, laptops, smartphones, tablets, phablets, and wearable technology.
Plus, the cost savings extend beyond the sticker price and include maintenance, insurance, replacement, repair et cetera. With big cost savings on technology, entrepreneurs can re-rout that part of the budget to other areas of the business. Technology comes in many different forms across industries. For example, infrared cameras are a breakthrough technology for detection of gas leaks, water leaks, insulation problems, and for security purposes. In the construction industry, new-age technology can reduce renovations costs such as the Magic Walls system used by real estate developer Danny Haber, or universal payroll software systems used by leading HR companies for a worldwide client base.
Go paperless and save big league
Many start-ups burn through paper at a fiery rate. All the papers used by start-ups can be avoided by using electronic invoicing, emails, communications, text messaging, notices, and the like. There is no need to print out every single document and store it in a file. It is time intensive, cost intensive, and resource intensive. Nowadays, top-tier start-ups are saving large amounts of money by storing data in the cloud, or on hard drives. The switch to digital has many benefits, not least of which is the impact it has on the bottom line. These environmentally friendly business operations are appreciated by stakeholders, internally and externally. While the paperless route will save money, it must be viewed as part of a much greater cost-cutting strategic plan along with other options.
Don’t customize software, use free tools
Every time you customize anything, you pay a premium price for it. Even if you’re not an entrepreneur, think about that jersey you bought of your favorite NFL or NHL team, and you decided to put your name on it. It costs a pretty penny. Customization of software is geared towards your specific business’s needs. The most successful entrepreneurs understand that it’s better to adopt a simple approach before you personalize things to reflect the unique nature of your business.
Test your idea out on general software and then once you have validated your concept, you can create a customized platform. The cost savings are dramatic. Many entrepreneurs and their pet projects get mired in the ‘need’ for customized solutions before ideas have been validated. Save time, effort, frustration, and money and use free tools as long as possible. Once you get off the ground, your business will have to migrate from using free tools for personal use to premium tools for business use.
Get involved in your project as much as possible
Many entrepreneurs like to maintain a vice-like grip on their projects, by managing all aspects from central command. Others take a laissez-faire approach to things by delegating and allowing a participatory style of management and leadership. When stakeholders roll up their proverbial sleeves and get involved, this helps to reduce costs. One such company, oWOW stresses the importance of ‘teamwork as dreamwork’, with all team members actively participating in getting out in the field rather than sitting in the office and paying others to do the work.
This development company believes that full immersion of stakeholders is needed to achieve their strategic objective of bringing down housing costs. With start-ups, success or failure often depends on the level of intensity, commitment and activity of its team members. In this vein, you may wish to avoid outsourcing, and get involved in your project as much as possible. This reduces costs and provides valuable in-the-field experience which is priceless.