The probability of a startup becoming a success is about 3 times out of 10. Depressing right? Of course, the reasons for failure will be different depending on the business model. According to recent surveys, insufficient capital is one of the major causes. So, what does one do to tackle this?
Here are some tips on how you can save money on running costs as a startup.
1.Dream Big, Start Small
The dream might be to own a major restaurant or clothing store, but the reality is, this will require a lot of capital. You can still run your idea, albeit on a smaller scale.Consider starting with one product or going the e-commerce route. As your profits and customers grow, you can then expand.
2.Invest Profits in Interest-bearing Accounts
A great way to grow your capital as you build your business is to invest in an interest-bearing current account for business. This might sound counterintuitive because we always think of interest-bearing accounts in relation to our personal finances. However, think about it – if it works well for your personal finances, it will work for your business too – and you will also reap the other benefits associated with a separate business account.
3.Monitor your Receivables
You’ll struggle to maintain your operating cash if client invoices aren’t paid on time. We recommend adopting the Cash on Delivery model or setting a payment deadline – for example, within 10 days after delivery.
If your business service offering is long-term, consider asking for 50% of the payment upfront and follow up the balance immediately, the projects have been completed.
4.Use the Barter System
Instead of paying cash and using up your working capital, why not trade your business’ service offering for something you need. For example, if you own a web design company, you can strike a trade deal with a marketing company; that is, design their website in exchange for them running an ad campaign for your business.
You can choose to make informal barter arrangements with other business owners also or look for trade opportunities on the numerous barter exchange groups you can join online. Please ensure the term of your agreement is in writing, as you’ll need to report it while filing taxes for your business.
5.Adopt Eco-friendly Practices
Adopting eco-friendly practices is one of the easiest things you can do as a startup to save money. Consider buying energy-efficient office equipment, shopping at flea markets and consignment stores for office furniture, printing on both sides of a sheet of paper, or choosing suppliers that sell green products.
As a start-up up with limited capital, hiring full-time staff is not always smart. To cut down on cost, consider hiring freelancers. If you do have to hire full-time employees, you may want to offer them a share in the business in lieu of a bigger salary and other benefits – and as extra motivation.