Don’t let business startup costs doom your business from the start. Overbuying equipment, software, inventory and supplies for your new business can deplete your operating cash. Use these tips to keep your costs down.
Starting a business? One common mistake startups make is to try to buy all the equipment, software, inventory and supplies they think they’ll need so they have everything in place when that first customer comes knocking on their real or virtual door.
Going on a pre-startup spending spree is a big mistake because most startups make bad predictions about what they’ll really need and how fast sales will start coming in. The fancy desk, oversized printer, extra tablet computer to take on sales calls, and cases of inventory in the garage are nice to have once you know you can pay for them from your profits, but until that time, big startup expenditures can put your new business (and maybe your family) on shaky financial ground. You can keep your expenditures down and still get your business off to a good start with these cost-control tips:
1. Let necessity dictate what equipment, inventory and supplies to buy
There’s never any shortage of cool new things to buy when you’re in business or starting one. New tools, supplies, furniture, equipment, software, training materials and books are all appealing, and potentially useful. But they are all expensive (for a startup) and not everything you want to buy will really help you make money. So, before you buy anything new, make sure you really need what you want to purchase. Although that sounds like common sense, overbuying and buying on impulse are common mistakes and sometimes put new small business owners into a big financial hole.
Newcomers to business are most often tempted to overbuy, but established business owners aren’t immune to the practice either. To control your spending, carefully consider how you will use what you want to buy, and when you will need it. Ask yourself questions such as these before making your decision:
- Are you managing now without the product you want to buy?
- Is there a specific contract you will be able to get if you have the piece of equipment you want to buy?
- Are you sure the contract would go to you and not to a competitor?
- Can you subcontract out a part of a job until you see whether there will be enough orders to pay back your investment in a reasonable amount of time?
- Could you temporarily rent the equipment you want to purchase?
- Is your productivity and ability to compete being impaired because you don’t have the item you want?
- Will the item you want to purchase be something you will use every day, or only occasionally?
- Can you afford to buy the item and pay the credit card bill when it arrives?
2. Use all available space
Space is always in short supply in home offices and small businesses. Desktops, cabinet tops and bookshelves rarely offer enough space for equipment, supplies and work in progress. But with a little creativity, you may be able to find more space in your office. Rearrange the furniture to make room for a desk. See what can fit under you desk besides your feet. Make extra space by cleaning out your basement or garage. Look in WalMart and other discount stores for inexpensive tall bookcases, short filing cabinets, and even plastic storage containers to hold items you must use, then, when the business is profitable, replace those inexpensive items with better quality goods.
3. Make space in a closet
One way to make more space if you work in a small room is to build your office into the closet. Remove the door, add bookshelves, and a table top for the computer. Purchase a low, rollaway file cabinet to fit under the table top.
4. Turn file cabinets and a door into a desk
It’s an old trick, but one that works: get two, two-drawer file cabinets that are the same height, and then top them with an inexpensive door. You’ll get a desk that’s wide enough to hold a monitor and hard drive and keyboard, at a fraction of the cost of regular office furniture.
If the height of the file cabinet/desk is too high to be comfortable to work at, get a chair with a pneumatic seat and a foot rest. Then raise your seat up to a comfortable work height.
Related: Where to get money to start a business
5. Buy furniture and equipment at garage sales and auctions
If you are looking for items you can use in a home office, garage sales can be a good place to find used bargains. Your best bet: look in weekly shoppers or newspapers for garage sales being held in high-income neighborhoods. Pay particular attention to those that indicate the sale is being held because the family is moving out of the area. Plan to get to those sales at the very earliest date and time indicated in the ad. If there’s a phone number, call ahead and find out if they are selling what you want and if you can look before the sale starts.
6. Find treasures in the trash
Office furniture and equipment doesn’t have to be new to be serviceable. You can often find what you want at considerable savings or even free if you are willing to accept merchandise that isn’t brand new. My son once got me a commercial 4-drawer filing cabinet for free because his employer was throwing it out. My son asked if he could have it, the employer said yes, and I’ve been using it ever since. Savings? About $175-$250.
Finding sources of used goods is easier than you may think, too. One way to find used merchandise is to look on Craig’s List. Look in the classified advertising section of newspapers and trade magazines for used items for sale and auction notices. Keep your ears open for news of companies leaving town, closing divisions, or closing down, too. They may be willing to sell you furniture or equipment for pennies on the dollar. The owner of a chemical laboratory once got all the lab tables and a hood he needed for expansion for a few hundred dollars by purchasing them from a company that was closing its laboratory division.
If you will need a non-home office location, ask the landlord if they have any furniture you could borrow. Sometimes tenants leave office furniture and chairs behind, and they could be yours for the asking. Alternately, consider renting furnished office space on a part-time or full-time basis for the first year or so.
7. Buy small quantities of supplies
Buying a box of copy paper may save you money on each sheet of paper, but if you need to save space and cash, buy just a ream or two instead. Use the same approach for any other office supplies you need to start. You can get most office supplies in small quantities at a reasonable price from Walmart. Once you see how fast you actually use the supplies, than you can buy in quantity to save money.
8. Match your work surface to the job it has to do
If you are going to be sitting or standing at your work area for more than a few minutes at a time, be sure it is comfortable and adequate for your needs. Measure the work surface and then measure any equipment you plan to put on it before you make a purchase.
9. Get rid of what you don’t need
If you’re trying to find a space to work in your home, or if your home office is beginning to feel a bit crowded, look for things you can get rid of. All those old books or magazines, or other “stuff” that you no longer use, take up space. Space you could use to store items for your business. If you haven’t used something in a year and don’t need to save it for tax, legal or family reasons, consider getting rid of it.
Your business, itself, may accumulate a lot of “stuff.” Don’t hang onto anything that’s not necessary. Clean your file cabinets out before you buy another file cabinet. If you have been in business long, you’ll be surprised at what you will find. If there are records you think you may need, but don’t need to access regularly, put them in a plastic storage container and move them to a basement or garage or other out-of-the way area. Make copies of important documents such as your business license, certificate of incorporation, long term contracts or other essential information. Put the originals in a safe deposit bank and keep the photocopies with your other store records. Learn to print less and store more on your computer, too. But be sure to have a good backup system in place.
10. Shop for office supplies and equipment at midnight
Or, shop any time of the day or night that it’s convenient. All the major office supply stores have Internet sites, and many have free shipping for orders over a certain amount. When you buy something online, you’re less likely to see and buy non-related items that catch your eye (as you might if what you wanted at the retailer was at the back of the store.) You can also keep your costs down by searching online for the supplier with the lowest cost for what you want to buy.
11. Recycle paper
Chances are you print out a lot of information that you don’t need to keep. To keep costs down, don’t throw out the sheets of paper after you’ve read them. Recycle them. Either feed them back through your printer and use the blank sides for rough drafts of your work, or cut up the paper into note-sized sheets and staple it together to use as scratch pads
12. Keep web design costs to a minimum
If you’re planning to create a website for your business (and you should!), do it for the least possible amount of money to start out. There are many web hosting companies that offer very low cost hosting packages that come with a variety of ready-to-use templates for setting up your website. There’s also a website builder called WordPress that lets you manage a website on your own. You can either learn to use these tools yourself, or pay someone to do it at a much lower cost than you’d pay a web developer to design and build something unique for you. If your startup will be selling items online, using a cloud-based storefront is quite inexpensive, and can let you avoid having to get your own merchant account to accept credit cards online.
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