How Do You Calculate Startup Costs?
If you’re unsure about expenses, you might want to look into the various online templates designed to generate estimations for business startup costs. Like Gusto’s startup budget spreadsheet, these tools can tell you how much capital you’ll need to cover initial expenses.
This includes your various recurring expenses, like rent, payroll, or marketing. Ideally, your business will earn enough revenue to cover monthly, quarterly, or annual costs continuously. But at this stage, you can’t guarantee that your business will earn income at all, at least during its infancy.
For this reason, you should assume that you’ll have to cover recurring expenses on your own for at least six months. This way, you can devote 100% of your energy to attracting customers without worrying about how you’ll keep your lights on.
What Are the Most Essential Startup Costs?
The following expenses apply to the average small businesses, though the spending amount varies tremendously from industry to industry. Thus, we based the accompanying range on the logical minimum and maximum you should spend on each expense.
Incorporation Fees
If you choose to register your business as an LLC, you’ll have to file articles of organization with your state and pay the required fee. This fee can range as low as $50 and as high as $725, but most states charge under $300. Sole proprietorships do not have to register with their states and therefore have no such fee.
Licenses and Permits
All businesses need at least one license: the local business license. Without this license, you cannot legally operate your business within your town’s or city’s limits. You must apply to your local or city government and pay the required fee.
Most types of businesses must also obtain licenses to operate in their home state. This license allows the state to track your business’s revenue to ensure appropriate taxation.
Anything beyond these two licenses depends on your industry. For example, retail-oriented businesses must register for sales tax permits to collect, report, and pay sales taxes. Like electricians, cosmetologists, and barbers, certain professions cannot do business in most states without occupational licenses.
Office Space
You may have heard about the affordability of shared workspaces like WeWork. Rest assured, these did not earn this reputation from their monthly rent, which still ranges in the thousands for smaller businesses.
Instead, certain businesses view shared workspaces as suitable investments because, in addition to your office, you get free desks, swivel chairs, Wi-Fi, conference rooms, and kitchens stocked with coffee and tea. But once again, if you’re just looking at price, you can’t exactly call shared workspaces “cheap.” So, regardless of which space you choose, you should still plan on spending approximately $1,000 per employee per month.
The high cost of renting office space suggests that you should work from home in your business’s early stages unless you need the room. Countless successful companies were started in the owner’s home, mainly because it took months to earn enough money to pay rent.
Equipment
Every business uses some form of equipment. This includes office-based companies, which need computer monitors, wireless routers, etc. Nowadays, employees of young tech startups often use their personal computers as their work computers. In the past, the company had to pay for each employee’s desktop. It’s safe to say the tiny equipment bill of tech startups has made the idea of launching one dramatically more attractive.
Most other industries, however, have pretty steep equipment bills. The notoriously massive startup costs of restaurants, for example, stem primarily from modern ovens, freezers, dishwashers, etc. Similarly, you can find outrageous equipment bills everywhere, from hair salons to doctor’s offices to auto repair shops.
Besides industry, your equipment bill depends on your team’s size and the different types of employees you have. At the very least, you will probably end up spending $5,000 to $150,000 on essential equipment.
Inventory
New businesses must provide exemplary customer satisfaction to get their foot in the door. It’s usually challenging for retail, wholesale, and distribution businesses to accomplish this without buying massive inventory amounts. Such companies should plan to spend at least 25% of their overall budget on inventory, though that number will likely drop as the business grows.
Heavily seasonal businesses should spend the most because they have shorter busy seasons. If they don’t take full advantage of customer interest surges, they won’t make enough money to carry them through the upcoming slow season. And when customers need their products, they need them right away. Rather than waiting for your business to order out-of-stock merchandise, they’ll just find it somewhere else.
Marketing
This one depends on your industry. Some businesses can spend close to nothing on marketing in their early stages. Aside from email campaigns and social media, they don’t need other online marketing tools to attract customers. However, many others have to invest in paid advertising and video content to meet their industry’s standards. B2B businesses, for example, must make themselves accessible to potential clients because the average person has likely never heard of them.
Nevertheless, even the latter group members can keep their marketing budget low by capitalizing on cheap marketing strategies. Here’s where that entrepreneurial creativity comes in handy. If you take the time to develop the right approach, the most economical marketing resources can promote your business just as effectively as the latest, most advanced options. So, unless your industry demands the use of paid advertising, you can undoubtedly draw tremendous attention to your business with less than 10% of your budget.
Here are some low-cost marketing tools and strategies that can draw tremendous attention to new businesses:
1. Search Engine Optimization (SEO)
A marketing strategy can only be a true success when it brings in more revenue than it costs. This is why SEO is widely known as one of the most profitable marketing strategies. It technically costs nothing but can do wonders for lead generation if used correctly.
An SEO-proof website shows up at the top of the results pages when someone enters a relevant search query. Optimizing your website for SEO, however, is no easy feat. Step one is making sure your website is up-to-date, user-friendly, and full of relevant information. Visitors should have no trouble finding answers to frequently asked questions about your business, offerings, and industry.
You must then litter your content with keywords or phrases you want your business to be associated with. What kind of words does your target audience use when searching for a company like yours?
But even if you obtain these components, your website’s search position probably won’t improve without substantial traffic and engagement. So, once your website is SEO-proof, you can focus on driving both metrics via other low-cost marketing tactics on this list.
If you can’t figure out why your search position isn’t improving, you may consider enlisting the help of an SEO expert. Since you haven’t spent any money on SEO thus far, the cost of a single consultation will still be lower than most paid advertising tactics.
2. Blogging
Blogging and SEO go hand-in-hand. Not only does blogging give your site more relevant information, but it can also act as another source of traffic. You can promote your posts through social media or email and structure them to boost SEO capacity. Integral components of an SEO-proof blog post include outbound links, strategic use of keywords, and clear, concise writing that isn’t too wordy or repetitive. New blogs often gain traction by addressing industry-related topics that have yet to be given this much attention. The reader looks at the title and thinks, “This could be fresh and interesting.”
The reception of different topics can show you the kind of content your audience prefers moving forward. And of course, there’s no cost to starting a blog.
3. Facebook Ads
Facebook is considered one of the least expensive digital marketing channels. Yes, it costs money to promote your posts, but most businesses only promote a handful of posts per month. It’s simply not practical to promote most of your Facebook posts because promoted posts are supposed to be designed for narrower audiences with higher conversion potential.
A successful Facebook marketing campaign usually involves a healthy mix of promoted and standard posts. The whole point of marketing to narrower audiences is that it shouldn’t take much effort to convert them. So, if you structure your promoted posts carefully, you should grow your customer base with a relatively small monthly budget.
The cost to promote a Facebook ad is determined by a per-click model, which means you pay a fee each time a user clicks your ad. The average cost-per-click for a promoted Facebook post is approximately 27 cents, though it can range closer to 50 cents.
Website
Much like marketing, the standards for websites vary dramatically from industry to industry. If your website just needs to provide basic information about your business, you may want to look into Squarespace or WordPress services. These services can cost as little as $8 per month, and you don’t have to know anything about coding to build the site yourself. Most of them offer additional services, like email marketing and blogging, for higher monthly or annual premiums.
If your competitor’s websites stretch way beyond the realm of basic information, you should probably hire someone to build the website for you. This will likely cost significantly more than the services mentioned above. But as long as you choose the right designer, making your money back will pale in comparison to the rest of your rewards.
For a great post about all of the factors involved in building a new website step by step click here.
Furniture and Supplies
Shared workspaces and software tools have eliminated the need for microwaves, filing cabinets, water coolers, and printers. As mentioned earlier, investing in the former also gives you desks and swivel chairs.
Nevertheless, accounting and project management software have their costs, which typically depend on your business’s size. You’ll probably end up using more of these tools as your business grows. But for now, you won’t overspend as long as you only purchase enough office furniture and supplies to complement the number of people on your team.
Regardless of your needs, no business should spend more than 10% of its budget on the two expenses combined.
Utilities
If you rent your own office space, you’ll have to pay for electricity, water, Internet, heating, air conditioning, etc. HVAC units usually cost around a few thousand dollars, which does not include the cost of maintenance (HVAC units require regular upkeep). So, you should only install an HVAC unit if you need it.
Aside from HVAC, the rest of your utilities should cost about $2 per square foot of office space. However, you’ll probably pay less than that if you don’t have an office phone bill.
Payroll
In addition to industry, payroll depends on numerous factors. If you offer overtime pay, daily lunch or travel stipends, or bonuses, you must leave room for those things in your payroll budget. Many startups save on payroll by enlisting independent contractors (1099 workers) instead of traditional W2 employees. The technical definition of independent contractors implies fewer hours. But early full-time employees of startups may retain this status until the company grows solely because W2 employees cost more money in taxes and benefits.
Speaking of growth, the size of your team may change dramatically over one year, especially in your early stages. So, if you plan on doing significantly more business throughout that time frame, you should also plan on expanding your team in the process.
For these reasons, two startups can have wildly different payroll budgets. At the minimum, you should keep payroll costs at approximately 25% of your budget. But once again, if your business multiplies and you distribute multiple forms of compensation, you could quickly end up spending more than twice that amount.
Professional Services
This term refers to bookkeepers, accountants, attorneys, and other professionals that help you make critical financial decisions, manage your finances, and remain legally compliant. Most business owners lack the knowledge and time to do these things themselves. Thus, when faced with unfamiliar tasks, you can avoid potentially hazardous missteps by simply asking for help.
Examples of such tasks include choosing employee benefits programs, preparing tax returns, and shopping for small business loans. You can leave all of this (and much more) to your certified public accountant (CPA). Finding the right CPA for your needs makes your life infinitely less stressful. Your CPA will prevent you from overspending in any area and tell you how to recover from unforeseen crises.
Attorneys enter the picture when it comes to legal issues like trademarks or filing incorporation documents. You may also need legal advice when developing business partnerships without formal contracts, especially when conflicts ensue.
How Much Should You Pay Your CPA?
As for compensation, CPAs and lawyers typically charge by the hour. Their going rates depend on the level of involvement they have with their other clients. Particularly laborious tasks may carry additional fees. So, before choosing professional consultants, lay out your expectations for their duties. For example, do you plan on meeting with your accountant every month, or only when tax season approaches?
If you only wish to hire an accountant for complicated projects, you’ll probably have to learn to independently complete basic tasks. Thanks to accounting software, even the least financially-inclined business owners can become amateur bookkeepers. These tools can teach you to process payroll, create invoices, manage your general ledger, and more.
But regardless of how many tasks you outsource, your CPA and lawyer’s roles will increase over time. You might spend just over $1,000 on legal and accounting fees in your early years, compared to five times that amount later on.
Insurance
Most states require businesses with employees to purchase worker’s compensation insurance and unemployment insurance. Some states add disability insurance to that list.
Though not required by state law, general liability insurance protects against extremely common misfortunes for certain industries. Let’s say one of your customers or vendors sustains an injury on your property or from your products or services. General liability insurance, which costs about $400-$600 per year, would help cover the costs of the lawsuit filed against your company. For this reason, industries with particularly high risks of injury, like construction or landscaping, basically cannot exist without general liability insurance.
Or, say another company sued your business because one of your advertisements looks too similar to theirs. General liability insurance would help cover the legal costs of settling the claim.
Owners of brick-and-mortar businesses should at least look into commercial property insurance, which costs about $1,000 to $2,000 per year. This coverage protects your business’s inventory, equipment, and physical property from loss or damage. Applicable incidents include theft, fires, vandalism, explosions, and certain weather-related incidents. The typical package excludes severe natural disasters like earthquakes, floods, or tornadoes but would likely cover flooding damage from plumbing issues. You can pay to add coverage for specific hazards, though the typical package for your area should include the most common weather-related incidents.
Companies with high risks of property damage should also look into business interruption insurance. Commercial property insurance covers the cost of repairs or new assets, while business interruption insurance accounts for the income you lose due to these incidents. Your insurance provider will likely allow you to add business interruption insurance to your commercial property coverage.
Taxes
All standard corporations, or C-corps, pay a maximum of 21% corporate income tax. Regardless of how much money the corporation makes, it won’t pay more than 21%. Most other business entities pay income tax at the business owner’s individual income tax rate. This includes limited liability companies (LLCs), sole proprietorships, general partnerships, and S-corps.
These businesses’ owners can deduct up to 20% of their income before determining their individual tax rate. And as a new business owner, you can deduct up to $5,000 in startup costs from your first year in business. The vagueness of this policy allows companies to apply it to all sorts of expenses. You can even categorize the money you spend researching different industries as “startup costs.” Plenty of new entrepreneurs have likely classified the cost of a recent vacation as “industry research” to deduct the flight and hotel from their tax bill.
What Are the Best Free Tools for Startups?
Many new entrepreneurs would likely say that the key to getting a business off the ground is making the best use of the right free tools. But you can’t choose the right tools if you aren’t aware of what’s available and which needs they serve.
In this guide, we’ll go over 22 of the most popular free online tools for small businesses and explain how they simplify the challenges of starting and growing a business.
Free Tools for Startups: Advertising
Advertising has an expensive reputation. Some businesses would likely say it’s one of their largest recurring expenses. But before you even think about advanced marketing tools, you must first make sure you are making the best use of the various free resources at your disposal. These are great starting points for online accessibility, and certain businesses will appear illegitimate if potential customers find out they aren’t using them. If someone hears about your business, their next step is to learn more through the following tools:
1. Google My Business
Once Google became the world’s most popular search engine, establishing a profile on Google My Business became mandatory for new businesses. When you Google a business, the business’s free profile comes up on the right side. This is where you’ll see the business’s hours, location, phone number, link to their website, and a summary of what the business does.
Including as much information as possible in your Google My Business profile also makes your website more accessible for relevant searches. In other words, your website will be more likely to appear as one of the top results when someone searches for your products or services.
2. YellowPages
Yes, that gigantic book from your childhood is on the brink of extinction. But YellowPages.com and the YellowPages app are very useful for anyone looking for a certain business type within a specific area. After all, every company wants to be known as the go-to source for their city’s product or service. You can also solicit and respond to reviews through this free profile.
3. Yelp
If you own a brick-and-mortar business (especially a restaurant, café, or bar), a Yelp page is just as important as a Google My Business profile. There’s no cost to create a Yelp business profile, which contains a plethora of vital information such as pricing, whether or not you deliver, if your business caters to children, etc. Yelp is usually where customers look at photos and post reviews, and virtually all negative reviews require an immediate response these days. For the foodservice businesses mentioned above, any flaws in your Yelp profile could be deal-breakers for your target customer, so it must be continuously monitored.
4. Foursquare for Business
Foursquare has a myriad of functions. You don’t need a Foursquare profile for customers to “check-in” and show their friends on social media that they are currently visiting your business. Customers can even list your business on Foursquare themselves and write reviews. However, it would be best to claim your free profile to see what everyone says about your business and respond accordingly.
Any critical updates should be posted to your profile since potential customers use Foursquare’s city guide to search for local businesses. Even if your customers have already listed your business, there’s a lot more information to add. The app also provides recommendations for new companies to visit based on the user’s browsing and check-in history.
Free Tools for Startups: Analytics
When entrepreneurs talk about the importance of data, they are usually just talking about the importance of telling when a strategy is or isn’t working. Analytics tools allow you to see how much traffic is going to your website and how these users found your website in the first place. The following tools are crucial for ensuring that minimal time and money are spent on ineffective digital strategies.
5. Google Analytics
Google Analytics is an integral tool for all digital businesses. You can see the number of people visiting your website at specific times, how much time they are spending on your website, how many of these users end up making a purchase, and whether they accessed your website through an ad, a resource like Yelp, etc. This information ultimately shows you whether or not your current marketing strategies (your website and ads) are successfully converting leads (users who spend significant time on your website and enter personal information) into paying customers.
And yes, all of this critical information is entirely free.
Delving deeper into Google Analytics also prevents you from being deceived by “vanity metrics.” This refers to traffic-related metrics that appear to indicate strong performance but are very misleading. For example, you might see an increase in website traffic, but how many users fill out lead forms or make purchases? Google Analytics essentially reveals how much of your website traffic is indeed the “right” traffic.
6. Hubspot’s Marketing Grader
Hubspot’s free analytics tool is much like Google Analytics. In addition to your website, you can monitor critical data for marketing efforts like your blog, social media, and email campaigns. Its principal purpose is finding out how well these efforts are converting leads into customers. However, you can also use Hubspot’s marketing grader to find out how your marketing efforts’ performance measures up to your competition.
7. Unbounce
Unbounce is only free for 30 days, but that’s plenty of time to gain numerous valuable insights from this lead conversion tool. Businesses often struggle to create the perfect landing page. Unbounce offers 100+ templates that you can customize with their massive selection of graphics, fonts, color schemes, etc. But once your page is finished, you’ll want to test different variations of it (A/B Testing), and it’ll take more than 30 days to obtain sufficient data.
Free Tools for Startups: Blogging
Blogging is a highly recommended marketing tool for a multitude of reasons. Chief among those reasons is that no other tool can generate such a massive buzz for no cost whatsoever. The most popular blogging platforms are free of charge and should, therefore, be taken advantage of by any small business looking to spread brand awareness and build up its brand identity:
8. WordPress.org
WordPress remains the top blogging platform primarily because it’s easy to use and designed for optimal SEO. No other platform has such an extensive library of SEO add-ons, ensuring that your content checks every box for accessibility through relevant searches. You can sign up for WordPress through most web hosting services and manage your blog (font, spacing, background, color scheme, etc.). It’s also not difficult to input images like charts and infographics.
9. CoSchedule
This WordPress add-on is geared towards businesses that regularly publish blog content written and edited by several employees. You can create content schedules for the coming months, send reminders to employees about their next assignments, track each project’s progress, share and schedule posts on multiple social networks, and so much more. Perhaps the most significant advantage of CoSchedule is planning, creating, editing, and publishing content from the same platform. CoSchedule is only free for 14 days (as opposed to 30) because, by that time, you should be able to tell if your blog is active enough to warrant this service.
Free Tools for Startups: Email
Sending and looking at emails will likely make up a large portion of your day-to-day routine. It’s easy to get overwhelmed with the number of emails you have to send each day and the rate of new messages flowing into your inbox. Emailing may also turn out to be your most effective strategy for marketing or business development, so you’ve got to stay organized and maximize productivity. The following tools will simplify all of your email-related tasks and improve time management in the process:
10. Boomerang
This third-part Gmail add-on allows you to schedule messages to be sent in the future (nope, you can’t do that with standard Gmail), send follow-up reminders to yourself, and mark important emails to re-appear in your inbox when you have more time later on. You can even choose to be reminded about a follow-up if nobody replies to the initial message. Boomerang is free for the first ten messages you schedule each month. With the paid subscription, there’s no limit to the number of emails you can schedule, and you gain access to all Boomerang features.
11. Organizer by OtherInbox
Organizer sorts through that barrage of promotional offers, newsletters, receipts, and business opportunities you receive every day and puts them into designated folders that you create. This ensures that the most important messages go to the top of your inbox and stay there, rather than being buried under less important messages. You can essentially set up Organizer to only show you the emails you need to see during work hours. So, if you have trouble tracking and prioritizing emails, Organizer could potentially make your day a lot less stressful.
Organizer also sends a “Daily Digest” email that shows which emails went into which folders. This spares you from having to go into each folder yourself and possibly forget about messages you were too busy to view when they first arrived.
12. Mailchimp
Mailchimp is the most popular email marketing tool for at least two reasons. One, it’s straightforward to use in terms of structuring your messages and making them look professional. Secondly, you can send up to 10,000 emails to up to 2,000 subscribers for no cost. You don’t even have to pay to access performance analytics (how many subscribers opened your email, how many clicked the links inside, etc.) or set up multiple templates for different purposes, like advertising blog content or brief holiday greetings.
13. Unroll.me
We’re all subscribed to email lists we don’t even remember signing up for. Every day, you tell yourself that you’re going to unsubscribe but never get around to it. It’s probably because, to unsubscribe, you have to open each email, scroll to the bottom, find the “unsubscribe” link, and then click a few boxes before you’re actually unsubscribed.
Unroll.me saves you loads of time by compiling a list of all subscriptions and letting you unsubscribe from each with just one click. Like Organizer, you also get a daily email that shows you how many subscription emails you received that day and how many subscriptions you’re still signed up for.
Free Tools for Startups: Communication
In today’s fast-paced climate, instant messaging is just as (if not more) important than email. Thus, it only makes sense for such an essential service to be free of charge. The following services help businesses maintain their high standards for productivity and stay in contact with their whole team:
14. Skype
Microsoft’s Skype remains the gold standard for video chatting and conference calls, whether between computers or mobile devices. Users can also send instant messages, share files, and host conferences with up to 25 other users. If you do a lot of internet calling and prefer to speak to employees or partners face-to-face, set up your free Skype account. If your primary concern is instant messaging, on the other hand, it’s probably best to look into one of the following services instead:
15. Slack
Slack is to instant messaging as Skype is to video chatting. It’s effortless to share files, hold conference calls, create group chats, and access messages from previous conversations through Slack’s search function. When you’re signed off, messages that were sent to you (or chats you’re a part of) are sent to your email inbox. Though Slack’s basic version is free, you have to upgrade to the premium version for unlimited use of all of its features. New users can decide which version suits their needs during their free trial.
16. Sococo
Sococo creates a virtual office for businesses with remote teams. Regardless of your physical location, logging on to Sococo puts your avatar into your office, where you can then communicate with other avatars (a.k.a. your colleagues) via instant message, voice chat, or video chat. You can also share screens with employees, hold conference calls, and view your colleagues’ activity in real-time (who’s working with who, who is on a call, etc.). Sococo’s starter plan is free, but it’s probably worth it to subscribe if you like the communal atmosphere it creates.
Free Tools for Startups: Productivity
Two essential elements for maximum productivity are the abilities to jot down new ideas and collaborate with your team from a single platform. These are the building blocks of strategies and projects. However, no longer do you have to pay to create, organize, and collaboratively edit documents.
At first, the following free tools might seem to fulfill relatively basic purposes. But countless successful businesses will tell you that making the most out of the services they offer can revolutionize productivity:
17. Evernote
Evernote allows you to create notes consisting of text, drawings, photographs, or saved web pages. These notes are shared with colleagues who can create their own notes and leave comments on each other’s notes. You can also tag, annotate, and easily search for notes to prevent any content from getting lost. All of these features are free as long as you stay within limits for monthly usage.
18. Google Drive
Google Drive is a lot like Microsoft Office; only you need Internet access to use it. Its principal purpose is creating documents and spreadsheets, which can then be shared with and edited by your colleagues. They can also leave comments and suggestions next to specific parts of the text. As the administrator, you’ll receive email updates whenever someone edits or comments. And as long as the person you’re sharing the document with has Internet access, they can use Google Drive. You don’t have to ask the person to install separate software.
Free Tools for Startups: Social Media
An active social media presence is mandatory for virtually all types of businesses. But before developing your strategy, you must first obtain the necessary resources for fulfilling your daily output goals. The following tools will streamline your social media posting process so you can ultimately release more posts in less time.
19. Hootsuite
Hootsuite allows you to manage multiple social media accounts (Twitter, Facebook, Instagram, LinkedIn) from a single platform. You can schedule and automate posts, respond to comments, and filter conversations by keywords or hashtags. This will reveal which keywords your followers us when discussing your business. Key performance metrics, like engagement, likes, and response time, are accessible as well. Hootsuite has a free plan, but it’s very limiting in terms of the number of accounts and posts per month. You can try out its next cheapest plan for free for 30 days.
20. Instasize
If photos and videos are a big part of your social media strategy, InstaSize can help your visual content stand out in quality and structure. This app provides original filters and editing tools for creating stunning content for platforms like Instagram, YouTube, and more. Though InstaSize’s standard plan is free, its paid plan is extremely affordable and offers many more features. You’ll receive ongoing tips and tutorials from social influencers and experts.
Free Tools for Startups: File Storage
Businesses with lots of documents, spreadsheets, and other files are the target customers of cloud storage tools. The following tools keep large amounts of files in one place, so you can share them and have them edited by colleagues:
21. Dropbox
Dropbox is the most popular file storage tool because it is effortless to use, and your first gigabyte of data is free. That might be plenty of data for a smaller business. You can upload various files (PowerPoints, Excel Docs, Word Docs, etc.) and share them with your colleagues via email, Slack, or other project management tools.
22. Box
Box is very similar to Dropbox, but you can store up to 10 gigabytes of free data. To share the files with other people, however, you’ll have to pay. For this reason, Box may be more appropriate for a financially-conscious sole proprietor than Dropbox.
Now that you know which resources you’ll probably need to start a business, you can move on to the most important question of your career: What kind of business should you start?
Which Business Ideas Have the Lowest Startup Costs?
One of the most practical ways to figure out what kind of business to start is by each option’s required expenses. Luckily, there are plenty of low-cost business ideas that lack the notoriously outrageous startup expenses of traditional companies.
You don’t need an office, employees, or expensive equipment. Some business ideas have zero startup costs. This lack of expenses significantly increases the likelihood of financial success. The less operational and recurring expenses you have, the more revenue you can keep for yourself. You are free to spend this money on growth-related resources designed to increase productivity, your customer base, and the quality of your work. If you invest in the right resources, it is entirely possible for a home-based entrepreneur to make just as much money (if not more) than a traditional business owner.
The following business ideas are incredibly cheap to start and can, therefore, be extremely lucrative. We’ll go over everything you need to get each business off the ground and explain why others who chose these paths have been successful.
Here are twelve low-cost business ideas with little (if any) recurring expenses:
1. Home or Office Cleaning Services
People have always hated cleaning. That hate has multiplied exponentially ever since we moved into an age where it’s completely acceptable to sit in front of a screen all day. Today’s young adults will gladly pay a reasonable price to have their homes cleaned, so they don’t have to. Even owners of small apartments don’t have the time or patience to perform basic cleaning duties.
Cleaning businesses require few expenses, aside from cleaning supplies. You might find customers who already have cleaning supplies but would rather pay someone else to use them. Before accepting jobs, there’s nothing wrong with asking customers if they can provide certain types of supplies. After all, the whole point of this business endeavor is to save money, right?
The only other startup costs for new cleaning services are official registration and, if necessary, business insurance.
As for marketing, you’ll probably generate most of your initial customers through word-of-mouth referrals, which cost nothing. Odds are, at least, a few of your friends or relatives know someone who needs a cleaning service. To maximize referrals, contact popular real estate agents in your area and ask them to refer you to new residents. You can also ask other local businesses about posting flyers and leaving business cards inside their shops.
As you take on more jobs, however, you will accrue more expenses. You’ll probably need a company vehicle to store the supplies required for larger jobs. The demand for a new cleaning service can skyrocket very quickly. For this reason, you must plan to hire employees eventually.
2. Freelance Writer
Freelance writing and editing is the full-time dream job of anyone who writes for a living. Once you’ve established a reputation within a specific industry (finance, fashion, etc.), you don’t have to accept jobs that deviate from your specialty. You can write about one industry in the style you’ve perfected.
Establishing that reputation, however, is not easy. You’ll have to market yourself very aggressively and possibly take any job that comes your way. The hunt for new work is endless. Even if you have a busy month, you never know what next month’s demand will look like. Success in freelance writing is reserved for those who embrace the tasks that come with this hunt, like going to social events to scope out potential clients. And until you build a substantial portfolio, you won’t be in the position to negotiate compensation that complements the quality of your work.
Your only startup costs will likely be promotional tools. This includes your website, paid social media ads, and business cards. There’s no cost to advertise your services on websites like Upwork or Fiverr, and you should be able to find plenty of freelance gigs on job boards like Indeed or LinkedIn. The more jobs you secure via these resources, the less you’ll have to spend on paid marketing efforts.
Before launching a freelance writing service, it’s essential to be open to all sorts of opportunities. You don’t get to choose your specialty; your specialty picks you. Writing about a specific industry every day will make you an expert, regardless of whether that was your original plan.
3. Tutoring
Tutoring can be a fantastic low-cost business idea if you’re passionate about math, science, literature, or history. You don’t need a traditional teaching license, but it’s recommended to complete some sort of voluntary certification program to prove your expertise. Other startup expenses might include textbooks, test prep books, and your website.
The rest of your budget ultimately depends on your capacity to solicit word-of-mouth referrals. Most tutors take advantage of tight-knit suburban communities and hardly need to market themselves at all. Establishing a relationship with the right parent could unlock a massive network of other parents who could use your services.
Though you should certainly be very active on social media, you probably won’t have to pay for ads. Your accounts on Facebook and Instagram will likely be reserved for communication and self-promotion (bragging about your students’ success is no longer viewed as arrogant these days).
4. Virtual Assistant
Virtual assistants can be just as valuable (and busy) as traditional assistants despite never meeting their employers face to face. Since most virtual assistants work full-time, they don’t have to market themselves consistently. This is one of the few low-cost business ideas with literally zero startup expenses.
The only other required investment is the time it takes to learn the most popular management-related tools. Learning how to use more tools allows you to offer more services beyond scheduling calls and meetings, creating to-do lists, etc. Virtual assistants’ common services include data entry, customer support, writing pitch emails, and taking notes on conference calls.
Before accepting a position, talk to your potential employer about their policy for raises. The longer you work for your boss, the more of his or her work gets transferred to you. In other words, the workload of a virtual assistant can dramatically increase very quickly. This isn’t a job for someone who gets easily overwhelmed.
5. Pet Sitting and Dog Walking
Compared to the other business ideas on this list, pet sitters and dog walkers might have the easiest time finding work. The demand for both services has increased as of late. Pet sitters and dog walkers make it possible for pet owners to work full-time without leaving their furry friends home alone all day.
You won’t need any certifications or specific credentials. This job is all about making an excellent first impression on the customer as well as their pet. Your marketing costs will likely amount to flyers and business cards displayed in local businesses, though your website couldn’t hurt.
The top requirement for both services is flexibility. Whether you care for pets in your home or your customers, you’ll need to match your customers’ scheduling needs.
With no other costs to worry about, it’s probably a good idea to set money aside for general liability insurance. This would protect you against the most common legal claims for pet care services. You might also consider looking into commercial property insurance, which would protect you if an animal under your care damages another person’s property.
Most pet sitters spend a lot of time just hanging around their customers’ houses. This is a big reason why pet sitting is such a lucrative low-cost business idea. You could use this time to do other work and get paid for two jobs simultaneously. Having two income sources also allows you to devote a similarly moderate amount of energy to each and keep your overall stress level low.
6. Food Truck
You’ve probably noticed a recent influx in food trucks. More and more foodservice specialists discover that food trucks are a much cheaper and safer business idea than traditional restaurants or café. There must be a massive demand for the cuisine or signature items to support a full-service restaurant’s operational expenses. Well, what if the market is there, but it’s not that big? Food trucks are a logical solution to this common dilemma.
Though your overhead will be much lower than a traditional restaurant, a truck and cooking equipment aren’t exactly cheap. Thus, you should test your items at smaller scale locations like community fairs, food festivals, or farmers’ markets. Customer feedback might tell you to make a few minor changes (pricing, selection, etc.) before getting your truck up and running.
You’ll also need the necessary licenses and permits for each location, which might include special city ordinances for mobile restaurants. And since much of your competition will be cash-only, you should secure an appropriate point-of-sale system, like Square or Stripe.
7. Event or Wedding Planning
Many people possess the traits typically associated with event and wedding planning: organization, patience, and just being a pleasure to work with. But like pet-related services, the key to success in this field is flexibility. Much of your work will be done on weekends, and you’ll probably have to do quite a bit of traveling.
Your overhead will be low because you can work from home and don’t need employees or equipment. However, whether this is a genuinely low-cost business idea depends on your marketing and networking strategy. If you’re a wedding planner, it might make sense to buy advertising space on websites like The Knot as well as social media, most notably Instagram. Another proven method for getting new business is going to bridal expos and other events to connect with vendors. Speaking with vendors and other planners will likely determine whether you should focus more on in-person or digital marketing strategies.
Wedding planners must also be cautious with spending because the business is highly seasonal. This essentially leaves you with two choices. You can either work in an area where weddings are more common in the winter or offer additional services to stabilize your income throughout the year.
Wedding planning could be a good fit for someone who has experience in party planning, event coordination, or hospitality. Strong organizational and communication skills, the ability to work weekends, and patience are necessary.
8. Babysitting
Starting a babysitting service might not be the most lucrative low-cost business idea, but it’s undoubtedly an ideal side hustle. And who knows: Establishing a trustworthy reputation in a particular community could grant you access to some very generous parents.
Most parents prefer babysitters that have completed several training courses, such as CPR and first aid. These courses will likely be your sole startup costs, and you can usually take them online. Depending on the age of the children you look after, you might consider forming your own set of toys or educational tools. Since today’s children tend to enjoy tablet-based activities, you should familiarize yourself with the most popular games and compile a list of favorites to suggest to new clients.
You probably won’t have to pay for digital advertising. Your entire marketing strategy could amount to simply posting flyers at local businesses, as well as other places frequented by parents. This could include schools, community centers, doctor’s offices, or places of worship. Advertising your services on sites like Sittercity and Care.com is free.
Odds are at least one friend or relative who knows someone that needs a reliable babysitter. So, you can start your search for clients by sending out a mass email to anyone with children close to your desired age group.
9. Social Media Management
Virtually all businesses need active social media accounts. But many business owners are relatively new to social media and cannot afford in-house marketing teams. Their most cost-effective solution is outsourcing their social media duties to a freelance consultant or manager.
Since you have no experience, you’ll have to build up your personal social media accounts and lend your services (like posting original content) to any friends or relatives looking to increase their followers. Yes, your first jobs will technically be pro bono. Once you’ve amassed a decent portfolio, consider taking an online course in social media management. This will likely be your only startup expense. Few other business ideas, however, require the time investment of a new social media management service.
Small, local businesses will be your first clients since they won’t mind your lack of paid experience. But regardless of their expectations, you’ll have to go above and beyond to produce real results. Basic social media management won’t cut it for your first clients since this is your opportunity to establish a reputation.
Even the most targeted social media campaigns take time to generate quality leads. Until this happens, you can prove your worth with the amount you devote to each client. This will reinforce the notion that their social media marketing investment will most likely pay off in the coming weeks or months.
Your first clients may ask if you can provide additional services, like blogging or general SEO for their websites. If these questions come up a lot, consider taking online courses to make your services more desirable.
10. Rideshare Driver
The demand for rideshare drivers remains strong. Aside from gas and maintenance, there are no startup expenses required to become drivers for Uber, Lyft, Via, etc. You can choose your hours, and you don’t have to market your services since your company is supposed to find work for you.
The amount of money you make depends almost entirely on your location. Ideally, you’d want to become a driver in an up and coming (or newly gentrified) area with low competition and high demand.
11. Massage Therapist
Alternative medicine is widely considered one of the best industries to get into. It’s growing fast and, unlike most other industries, has remained stable amid economic downturns. This growth is primarily attributed to the mass realization that treatments like massage therapy should not be reserved for birthdays and special occasions. The average person is more stressed than ever, so it’s completely understandable to get a massage every week.
What stops people from doing this? One good guess is having to drive to a massage studio. People in your local community would likely get massages a lot more often if their massage therapist made house calls.
In addition to providing your own massage bed and oils, you’ll have to obtain your massage therapy certification as well as any other licenses required in your home state. Like most other low-cost business ideas, your most significant investment will be time. New massage therapists typically build a customer base with special offers, like an extra ten minutes of therapy. Your customers also probably enjoy other forms of alternative medicine, like crystal therapy or cupping therapy. Thus, you might consider obtaining the required certifications for these services, too.
12. Web Development and Design
The same business owners who would benefit from social media consulting would likely benefit from web development services. Many older businesses have outdated websites because they can’t find an affordable web developer or designer. You won’t have to charge much because your expenses will mainly consist of basic software tools.
Local business owners will likely ask about additional web-related services like Ecommerce, software installation, or general tech support. If you’re only moderately familiar with these areas, a quick online course might be a worthy investment.
What Are the Best Business Ideas for Encore Entrepreneurs?
Rather than keeping the same job until retirement or retiring at all, an increasing amount of older individuals are pursuing entrepreneurship. Why not put their wealth of knowledge and newfound interests to good use? Their first careers were likely the most logical choice at the time. Now, they have the chance to do indeed what they love and rekindle the excitement of their youth. Their age offers numerous advantages and disadvantages to becoming an “encore” entrepreneur or “second-career” entrepreneur.
After solidifying why you’re starting a business in the first place, you can move on to choosing the type of business to start. This step forces you to answer essential questions, like: Do you want to work from home? Do you want to work longer hours? Answering these questions will tell you how much you’ll need to start your business as well as what you’ll be doing every day.
Here are three of the most appropriate business models for encore entrepreneurs:
Freelancing
Freelancing businesses are among the easiest companies to start, making them the perfect choice for encore entrepreneurs. Unlike other business models, you’ll have the freedom to spend time with your family, travel, and enjoy the relaxation you’ve rightfully earned.
Freelancers usually make their hours and work from home, billing clients by the hour or per-project. The only equipment you’ll need is your computer, and while most freelancers view their businesses as part-time gigs, you can certainly make just as much money as a traditional business owner. As long as you complete your projects on time, you can take days off as you please.
Industries that best suit freelancers include copywriting, marketing, graphic design, technical support, accounting, and virtual assistant services. When it comes to flexibility, however, nothing compares to rideshare drivers. Demand for rideshare drivers has only increased, and if you’ve been living in the same neighborhood for a long time, it’s safe to say you know your way around. Full-time rideshare drivers for companies like Uber and Lyft typically make anywhere from $100 to $200 per day.
The ease of freelancing often prevents freelancers from treating their businesses with legitimacy. As sole proprietors, freelancers might forget that they have to consistently put money away and keep track of their books for tax purposes. All home-based businesses also need home occupation permits and local business operating licenses. And once you begin generating a substantial income, you should almost certainly upgrade to an LLC to pay fewer taxes.
In summary, freelancers need to stay organized. This will become much harder as you take on more work, which is why you should look into popular apps for project management, customer management, and accounting.
Franchise Ownership
Franchising allows you to run your own business without having to start one from the ground up. You don’t have to create the product or service, develop a new business model, or take on the incredible challenge of marketing an utterly unknown business. This makes franchising a favorable option for aspiring encore entrepreneurs.
One of the biggest mysteries about franchises is the relationship between the parent company, the “franchisor,” and the franchise owner, or “franchisee.” For example, while the franchisor does take a cut of revenue for marketing, this usually only goes towards commercials, signage, and other national-scale campaigns. All local advertising initiatives are left up to the franchisee.
And while the franchisor does lease the physical space, it’s up to the franchisee to pay for new equipment, repairs, or furniture. The franchisee must also hire new employees, though the employee training program is already in place.
Aside from established brand awareness, arguably, franchising’s most significant advantage is that the franchisee does not have to secure or maintain partnerships with vendors or suppliers. The franchisor usually takes care of this notoriously troublesome responsibility.
So, before choosing which franchise to open, make sure you’re crystal clear about who handles what. For specifics about expenses, ask your prospective franchisor for the franchise disclosure document. Franchisors are legally required to provide this document containing the franchise’s budget, revenue history, and crucial financial information.
Franchises also have their requirements for franchisees, such as net worth and initial investment. You’ll have to pay a “franchise fee” simply for opening the new location. This can be paid in a lump sum or installments and typically ranges from $25,000 to $75,000.
Buy An Existing Business
Buying an existing business offers another smoother transition into entrepreneurship. Like franchising, you get to avoid the countless obstacles that come with starting from scratch. Nevertheless, while franchisees are required to follow precise instructions regarding strategy, owners of existing businesses can theoretically run the business however they want. You can probably find an existing business that aligns with your personal interests.
Compared to franchising, buying an existing business involves significantly more time and money. The full process of finding and acquiring the right company can take over a year. It’s not uncommon for deals to fall apart due to disagreements on price or the discovery of hidden problems like outstanding debts or products becoming irrelevant.
To get an idea of what’s for sale in your area, talk to local business owners and check the numerous websites that show businesses for sale. Business owners usually don’t alert the public when putting their businesses up for sale. Thus, the best way to learn who’s interested in selling is by speaking with business owners privately. After conducting research, you can take your first significant step in this process and contact a business broker.
Start a Brick-and-Mortar Shop
The most expensive and time-consuming path to entrepreneurship is opening your own brick-and-mortar shop. When you consider the number of expenses and physical labor involved, there’s only one logical reason to choose this option: location. If you’re looking to start your own business and know of a perfect location that’s newly available, it might make sense to capitalize on this rare opportunity. Location plays a massive role in the success of brick-and-mortar shops. For this reason, the right location can sometimes justify the astronomical costs of monthly rent or a commercial mortgage.
How Should You Finance Your Startup?
You’d be hard-pressed to find a successful startup that was initially funded by a loan. In 2013, billionaire Mark Cuban even went as far as to say that anyone who starts a business on a loan is a “moron.”
Starting a business is risky enough, so it just doesn’t make sense for a new company’s owner to give themselves anything more to lose. There’s no guarantee that the company will make money, let alone enough to repay a loan.
Here are a few reasons a business loan may be the last thing your startup needs:
Lack of Options
You may have heard about SBA startup loans with very low interest. This sounds tempting until you learn the requirements for eligibility. Banks approve SBA Loans, and no bank will approve a loan for a brand new business with little working capital. Banks don’t even approve loans for established businesses that lack ample cash reserves at their disposal. Borrowers may have to provide collateral as well. However, most new companies don’t own property or expensive equipment.
Let’s also not forget that banks have very stringent repayment structures. It’s not as if you could negotiate lower monthly payments until revenue picks up. Thus, you’d have to begin making monthly payments immediately, despite the uncertainty lying ahead. Online or alternative business financing companies offer multiple products and repayment structures, but most of them do not work with startups. Banks are your only option, and this option is just too risky for an untested business. If you miss a payment, you could ruin your credit score along with your chances of securing another loan.
Already in Debt
It’s common for new businesses to rack up significant debt in their first two years. There’s a good chance that more money is going out of the company than coming in. This is why new entrepreneurs typically don’t take a salary until much later on. They already have so much debt to pay off.
This debt, however, is supposed to come from investments that were made to increase revenue. It’s not supposed to come from the funds being used to pay its monthly bills.
Besides, if you use a business loan to pay your bills, what happens when there’s no more of it left? You have no idea if your business will even be alive by then. Still, you’ve got to pay off a loan as well as the other expenses you’ve accrued because of that loan.
Resourcefulness is Priceless
Creativity, resourcefulness, and grit are some of the essential qualities of an entrepreneur. Well, how do you think those qualities emerge? In many cases, they stem from the daunting task of growing a business with limited funds.
It’s much harder to develop these qualities when you start a business with someone else’s money. Rather than earning the means to start a business, it’s given to you on a silver platter. You essentially skip the challenge of using nothing but your brain to keep your business alive. Had you not skipped this stage, you would have learned how to make the best use of your resources by thinking outside of the box. You also would have learned how to think clearly under tremendous pressure. Many successful entrepreneurs agree that a business’s fate is decided when the odds are stacked against it. In other words, if you can conquer this initial challenge, you can conquer anything.
The qualities mentioned above are priceless. Therefore, it only makes sense to acquire them as quickly as possible.
What Can Startups Do To Save Money and Protect Cash Flow?
New businesses survive by figuring out how to get more done while spending less. This allows them to develop a business model that revolves around their most effective tactics for saving money without compromising productivity. The key to financial stability is balancing these tactics with the universal rules for protecting cash flow.
Here are a few financial tips that cover both areas:
Don’t Hire Unless It’s Necessary.
Than.ks to online services and the gig economy, today’s entrepreneurs don’t have to start hiring full-time employees right away. Unless your workload calls for it, you should probably postpone your first hire(s) for as long as possible. Full-time employees require multiple forms of insurance. And their salaries must account for federal, state, and local taxes, not to mention health benefits, social security, and Medicare benefits. Also, since full-time employees are such a significant expense, they will likely cost the business far more money than they bring in if you don’t have the right systems and processes in place.
So, instead of hiring full-time employees, consider outsourcing individual projects to 1099 independent contractors. Though independent contractors tend to charge high hourly rates, the cost of hiring a full-time employee for a task of this size will likely be much higher. This is because independent contractors are responsible for their expenses and have to pay their own taxes. Many startups save on payroll costs by working with the same group of independent contractors every week. You could theoretically give independent contractors a similar workload to a full-time employee. It’s up to the contractor to set limits on the amount of work they can take from one company.
Automate Tasks
Automation has become increasingly popular because it can help virtually any business type make and save more money. Think of all the time you spend on monotonous, manual tasks, like sending pitch emails or invoices. What if you could spend this time on revenue-generating activities while increasing the output of these manual tasks?
For example, rather than composing and sending invoices yourself, you could use an invoice management system. The same concept can be applied to email pitches, which would bring in more business at a faster rate as well.
Use Business Credit Cards for Certain Startup Costs
Business credit cards have significantly higher spending limits than personal credit cards. They will also keep your business finances separate from your personal funds, making it much easier to track expenses. Using your personal credit card to cover expensive startup costs could wreck your credit score and severely inhibit your ability to access affordable business loans.
There’s a lot of business credit cards to choose from. But only some are specifically designed for saving money on startup costs. For instance, the Brex Corporate Card offers many discounts and credits on tech startups’ everyday expenses, like digital marketing services and CRM (Customer Relationship Management) platforms. The rewards program also earns points towards other ordinary expenditures like travel and recurring software charges.
Set Aside Emergency Funds
One of the most common culprits for business failure is the lack of emergency funds. Every business runs into speed bumps, but only some have the cash to recover. For this reason, aspiring entrepreneurs are frequently advised not to start their businesses until they’ve secured as much cash as possible. That means years and years of saving money, cutting personal expenses, and selling whatever you can to make extra cash.
You should also secure sources of borrowed funds like business credit cards and business lines of credit. Both are suited for similar purposes, like covering sudden expenses or paying bills when cash flow dries up. The difference is the size of the expense they are designed to cover. While business credit cards are designed for mid-sized expenses, business credit lines can cover more considerable costs like bulk inventory orders or new equipment. Using a business credit card for this purpose would ruin your credit score and cause your interest rate to spike.
Don’t Order Too Much Inventory
Younger businesses often have a tough time getting a handle on demand. They haven’t been around long enough to understand how their target audience’s spending habits change throughout the year. As a result, the business ends up ordering too much inventory. In their eyes, it’s safer to be ready for surges in demand rather than keep fewer items on their shelves. But unsold inventory eats up precious working capital. And the longer an item goes unsold, the less profitable it becomes.
The solution to this dilemma is to practice last-minute inventory management. This refers to the practice of ordering inventory shortly before it will most likely be sold. It’s much easier to follow this strategy with a business line of credit, which we mentioned in the previous section. You could use your own funds to place moderate-sized orders and use the line of credit to order extra items should the demand exceed expectations. And since the revenue is coming in right away, you could quickly pay off the balance on the credit line to keep your interest low.
Stay on Top of the Right Numbers
Another common culprit of business failure is cash flow issues. You might wonder how someone could just let their business’s financial health deteriorate under their noses. Odds are, it’s because they were paying attention to the wrong financial metrics. New entrepreneurs often make the mistake of focusing on sales, the number of customers, revenue, and other metrics that seem integral to cash flow. However, they forget that other metrics like profitability, customer retention rate, and cost-per-acquisition are just as important. The metrics that matter most to your business will likely be the least deceptive. To clarify, the state of these metrics accurately reflects the state of your cash flow. Vanity metrics, on the other hand, are not positive indicators of success.
Don’t Rely On Your Work Ethic to Generate Revenue
We’ve repeatedly touched on the incredible work ethic required by new businesses. Hard work is crucial for success, but so is working smart. Eventually, you’re going to have to couple that work ethic with financial strategies like new pricing systems or additional income streams. For example, your business might be gaining traction by serving a lot of clients. But working tirelessly to help more and more clients can’t be your only strategy. It’s just not a sustainable way to earn revenue. Sooner or later, something is going to prevent you from keeping up that productivity rate. You can avoid this outcome by changing your business model to ensure that you’re adequately compensated for your work quality.
Research Your Options for Business Loans Now
Earlier, we alluded to the inevitable need for an emergency fund. Even if you have enough money to cover operational expenses on your own, you shouldn’t deplete your entire emergency fund in one shot. Instead, you should cover at least a portion of the damage with a business loan.
However, shopping for business loans isn’t easy when your business is on the brink of survival. And your options might be very slim considering the state of your cash flow. That’s why it’s highly recommended to begin researching your options now when your mind is clear. This way, when the need for additional funding arises, you’ll know who to call and what you can qualify for.
Work on Building Business Credit
Traditional financial institutions tend to base loan decisions on annual revenue, time in business, and available working capital. Alternative or online institutions, on the other hand, prioritize other aspects like business credit. Unlike those first three requirements, it is entirely feasible for a younger business to build a strong business credit profile. Your business credit score could play a massive role in your first loan’s borrowing amount, terms, and interest rate, depending on the institution.
So, when deciding which vendors or suppliers to work with, make sure they report your payments to the major credit bureaus. Besides your payment history with business partners, your business credit score’s other primary factor is your use of business credit cards. All you have to do is make timely payments and monitor the size of your revolving balance. Also, never use a personal credit card for business expenses. Whenever you use a personal credit card for business expenses, you miss the chance to improve your business credit.
Start with a Smaller Business Loan
Angel investors and venture capitalists can usually offer higher funding amounts than business loans. But have you ever considered the risks of putting a massive budget in the hands of an inexperienced entrepreneur? When placed in this position, a new entrepreneur might develop unsafe spending habits or build a big team without steady revenue or operational systems and processes to sustain it. New entrepreneurs are supposed to maintain a realistic budget to learn which resources they need and those they could do without.
For this reason, it’s much safer to start small and gradually take on more and more funding over time. Paying off a small or medium-sized business loan on time will also boost your credit score, making you eligible for a much larger loan with more favorable terms. Arguably the most critical benefit of taking on debt early in your career is understanding the true cost of a growth-related investment. Countless entrepreneurs have made the mistake of obtaining resources designed to increase revenue without considering the additional expenses attached to those resources.
Startup Business: The Universal Rules Still Apply
As you can see, while some of the old rules of financial stability still apply, others are entirely outdated, i.e., the need for a big team. Unfortunately, new entrepreneurs are highly prone to financial mistakes because they are so concerned with other priorities. They forget that a startup is still a business, even though it might not look like the traditional brick and mortar shop. But the truth is, it’s much easier to grow a business when you spend your early stages following the basic guidelines for protecting your financial health. So, rather than immediately pursuing your expansion plans, make sure you know how to maintain a budget and not take on too much debt.
What issues or lessons did you experience when starting your business? Share any thoughts or resources on our contact page!
