Guide to Starting Up a Business on a Budget Setting up a business at any time can be a daunting prospect. Setting one up in turbulent economic times represents an even greater challenge but success is certainly achievable, even on a tight budget.
The key to success starts right at the beginning. Whether you’ve spotted a gap in the market or have decided to go it alone with an established customer base, planning for all eventualities will help you spot any potential pitfalls lurking further down the road.
There are many websites offering business plan templates and advice on their structure. If the thought of writing a business plan is scary then don’t let it be. A new business really only needs to know the details of income and expenditure, likely customers and equally as important, the competition.
Profit is good but control expenses.
For many new businesses, the real excitement comes with the arrival of a big order or job proposal. This is understandable and often justifies the decision to go it alone, but it’s important to keep one eye on the other side of the equation.
Costs can spiral and so need to be controlled. This should really start before the business is up and running and there are some obvious areas to consider.
The type of business will clearly dictate the type of premises it operates from. If all you need is a laptop and a telephone then why pay rent to a landlord when you can use your own home? Expensive letterhead and other stationery can also be avoided with even today’s basic software packages capable of producing professional looking forms.
Help with the numbers
Depending on the complexity of your business you will at some stage need an accountant. It is worth making sure the one you choose is familiar with your type of operation, provides an up-front guide to fees, and isn’t concerned that you want to speak to some of his/her existing clients for a reference.
Bookkeeping software is also an important issue and apart from the well-known names there are a number of web based apps out there providing cost effective “accounting in the cloud”. The choice however should be based on what your accountant can actually work with.
Cash is still King
Setting up a business on a budget indicates that investment capital is in short supply. That’s not an issue in itself, however without cash the business will quickly die.
All businesses selling on credit have a cashflow gap to manage. Without contingencies in place, the time between raising an invoice and actually getting paid can create some real headaches, especially when suppliers want paying.
The obvious answer is to borrow money and to do that you’ll certainly need that business plan to convince those in financial services of your integrity. A business loan is one solution but there are others, and borrowing against those very same invoices offers a flexible way to plug the gap.
Factoring or invoice discounting is a method whereby a percentage of the face value of an invoice is advanced more or less as soon as it’s raised. The finance provider is secured by taking ownership of the debt and is repaid when the customer settles. Once their fee is taken, the balance of the invoice not originally advanced is paid over.
The advantage of this arrangement is that the funding available is directly linked to the level of sales a business generates. Unlike a loan or overdraft there is no need to renegotiate if a sudden rise in sales requires more cash to fund it.
Different businesses obviously need different facilities however there are some funders who provide a mix of invoice finance and traditional lending. A look at abnamrocommercialfinance will provide a good example of what’s on offer.
Spread the word
Advertising does not need to be expensive and glossy but some on-going promotion will be necessary to keep up the momentum.
Networking costs little and membership of local Chambers of Commerce and other business clubs provides a cost effective way to not only shout about your products or services, but gain a valuable insight into what others are doing.
They are also full of like-minded people, many of whom are more than happy to pass on tips, ideas and most importantly, business leads.
For more business finance infomation please visit www.abnamrocommercialfinance.co.uk