5 Ways to Save Money on Business Startup Costs

Ask any successful entrepreneur and they will tell you that starting a new business is by far one of the most exciting and stressful endeavors you can think of. It involves a lot of hard work, careful consideration and planning ahead, as well as having a clear understanding of the costs associated with getting a startup off the ground. Underestimate those costs and you risk becoming one of the 150 companies that file for bankruptcy each and every day.

Developing businesses often require funding on multiple fronts, which only increases the need for cutting unnecessary costs. Running a profitable startup while working with a shoestring budget requires learning how to allocate and prioritize the already limited resources and keep the overhead expenses as low as possible. Here are five ways to save money by cutting down startup-related expenses:

• Run your startup from home

People often think that renting out dedicated office spaces and fancy retail locations is an important part of a new business venture. This, however, is simply not the case. In fact, some of the largest brands in the world such as Harley Davidson, Hewlett-Packard, and even Microsoft were launched from a home office or a garage. Of course, not every business can and should be run from a home office and it’s your job as a business owner to ask yourself whether the expenses associated with renting out commercial spaces are worth the potential benefits it may bring to your company.

These expenses include lease or mortgage costs (depending on whether you’ve rented or purchased the space), utilities such as gas, electricity, internet and phone service, water, sewers, general and professional liability insurances, as well as business interruption insurance. Not to mention all the administrative and costs associated with maintenance and repair, etc. A simple home office coupled with a virtual storefront comes at a fraction of the cost while still offering valuable tax deductions.

• Find used equipment

No matter how constrained your budget might be, it should always include the basic equipment required to get the work done. That said, spending business-starting capital on brand new equipment and expensive furniture is simply a bad idea and an even worse business move. You can use the discount and second-hand sites such as Craigslist, eBay and Overstock, but also business-asset auctions and surplus sales to ensure maximum savings on the equipment and furniture. Alternatively, you can lease office equipment to conserve operating capital. Although you should avoid tech upgrades that offer little to no actual improvement, you might want to create a replacement and upgrade plan for computer equipment.

• Avoid hiring full-time workers

Your employees are precisely what makes your startup valuable, but hiring too many full-time workers creates additional financial constraints on your company. How? Full-time employees require insurance, pension, and salaries, all of which you might not be able to afford during the early stages of your startup. The best way to decrease employee-related costs is to only keep the core staff while outsourcing any additional help you might need. You don’t have to hire a full-time developer to iron out a single kink in the system.

• Use free and open-source tools and software

Almost every modern enterprise relies on a number of software solutions to manage their business. These include cloud storage, backup solutions, communication platforms, productivity tools, scheduling apps, product and service organizers and many more. Most of them are quite indispensable and almost all of them are quite expensive. Fortunately, there’s an entire digital sea of open-source tools and software solutions that can be used completely free of charge.

For content management, you can use Drupal and WordPress. MS Office can be replaced with LibreOffice and finance management apps such as Sage and QuickBooks with their open-source counterparts, GnuCash or TurboCASH. You can use VisualVM together with JProfiler and YourKit analyze system performance and fix any production performance problems. There’s even an open source Telephony tool called Elastix that integrates both e-mail and instant messaging.

• Neglecting digital marketing is not the same as cutting costs

Just because you don’t have a dedicated marketing team doesn’t mean that you should completely abandon your digital marketing efforts. In fact, some of the top digital marketing agencies advise strongly against neglecting to invest in digital marketing. It is the cheapest and most effective form of marketing whose results can be instantly measured and used to further adjust your marketing strategy and improve your bottom line.

As cheap as it is, digital marketing does come at a certain cost, and until you have a dedicated marketing budget you might want to put your effort into social media management. Besides brand, product and service marketing, you can also use your social media profiles for customer service by answering any questions your customers might have.

As you can see, starting a new business can be quite demanding, but it’s certainly not impossible. Trying to run a startup while working with a limited budget requires cutting down all the costs deemed unnecessary for your business. You cannot cut costs and save money unless you’re fully aware of all the different expenses associated with starting a business.