One common mistake that start-ups make when trying to run their business is hiring too many employees. Be sure to organically hire personnel when your start-up generates enough capital to handle the inclusion of new employees. Consider cash-saving techniques, like hiring unpaid interns from university, or part-time, contractually-based employees to offset the cost (check out our article “Hiring During Start-Up Phase”).
Another consideration to take into account with new employees is that each addition can obscure the roles and responsibilities of employees, upsetting newly-formed hierarchies and creating wasted labor when positions aren’t fully formed. Be methodical and have a well-thought out plan before beefing up your ranks.
Don’t Spend More Than Needed
While a decked-out office with all of the newest amenities is enticing, try to do more with less. Your business will thank you. Try to view everything with the old adage, “if it doesn’t make money, it doesn’t make sense.” This play-on-words can have you reevaluating every financial decision to determine if something adds value. Does a fancy Keurig need to be in the office, or will a regular old percolator do?
One rule of thumb for start-ups is to avoid purchasing new items unless absolutely necessary. Try to look for “Going Out of Business” sales to find discounted items for your business, or call your local universities to see if they are upgrading their equipment at the end of each semester. Auction houses and second-hand/op shops offer office necessities to the savvy entrepreneur, often being discounted for quick sales to liquefy assets. Online resources like Gumtree (www.gumtree.com.au/), Ebay, among many others, are good places to start to find necessary office supplies. Money saved for items that don’t need to be new is more cash that can be reinvested into your business.
If you run a business that usually deals with visiting clients in their own office, a single sublet office or even shared coworking space could be what you need to keep costs down until your start-up turns a reasonable profit. Having a home office or a separate partition in your home (such as a garage) is a way of enjoying both tax deductions and reducing your commute, saving both money and time to reinvest in your start-up
Time is Money
Try to look for ways to automate portions of your business, like payroll, invoicing, marketing, banking, etc. The less time you spend sifting through bills is more time spent on refining your business. A simple Google search yields numerous applications, from Quickbooks’ Intuit for payroll (payroll.intuit.com/) to Invoice Expert for Invoicing (www.invoiceexpert.com/)
Commuting from home to work is often wastes petrol and time better spent on your business. Try to calculate how much time is spent monthly simply transporting yourself to and from work. If you can, try taking public transportation, where you can begin work while someone else takes care of the driving.
Be sure to track down all unpaid invoices as soon as you can. (check out our article “Dealing With Unpaid Invoices”) There’s nothing more frustrating than not having the necessary capital to make decisions while having outstanding balances owed to you.
Never Underestimate Your Cash Needs
A good rule in traveling is “twice the money, half the stuff”. While an optimistic outlook is synonymous with success for any start-up endeavor, never underestimate how much cash you’ll need for every business decision. Allocating a buffer of double the amount of money is essential to prepare you for intangibles and incidentals. With this method, you’ll constantly be delighted to realise that your start-up is constantly staying within budget. Once you’re able to adequately estimate how much things really cost, you can reduce the buffer to a more realistic level, but be prepared to not be able to account for every unexpected inconvenience.
Although every start-up is began with the hope to free entrepreneurs from monetary woes, try to downsize expenditures in your life that reduce your cash-saving and efficiency. Make a list of your expenditures and see if any can be removed or downgraded to austerity measures. Funneling this excess capital back into your business can help spur it on to new heights or pull you out of financial doldrums.
If your business is turning a profit, pay yourself a reasonable salary and stick to it, keeping your assets and purchases separate from money generated by your start-up. Many businesses have tanked by irresponsible owners who’ve confused capital with profit.
Knowing when to say enough is enough can be disheartening for any new start-up owner, but having a clear idea of what failure looks like is a healthy measure. Have an exit strategy in place so that you can efficiently remove yourself from a dying business and save time that can be used for healthier ventures.