Starting a business can be expensive, as people find when they become entrepreneurs after losing their jobs. But many of these brand-new owners also have found ways to keep those costs down.
The biggest money saver is working out of your home. Asking friends and family to refer good but low-cost help, from accountants to graphic artists to lawyers, is another way.
Keeping startup costs down is essential when a business is young and money isn’t yet flowing in. But always watching your expenses and being sure they don’t get out of hand is a good way to help any company weather the downturns.
“We didn’t have a choice” but to keep costs low, said Michael Volpatt, co-owner of the public relations firm Larkin/Volpatt Communications. “What I’ve learned in the last 10 years is that financial stability is about sustainability.” And that, he said, means making sure a business isn’t ever undermined by costs.
Here’s a look at ways new entrepreneurs can keep startup costs down:
Work at home
Since many people who have lost their jobs tend to be at home, that’s where they start businesses. They can’t beat the low overhead.
Working at home requires some adjustments. A new entrepreneur needs to have space for an office. If there are children and pets around, it’s easy to be distracted. Some people find it isolating to be home much of the time.
There can be a financial plus in working out of your home besides keeping costs down. The federal tax code allows people with home-based businesses to deduct some of their expenses such as rent or mortgage interest, utilities and repairs.
But you may have to spend more on insurance. If a fire damaged your business equipment, or a business associate was injured at your home, your homeowners policy might not cover it.
Another option is to find affordable space. Do you have family or friends who are willing to rent to you? Jill Donenfeld, CEO of The Dish’s Dish, a personal chef service, started out four years ago in space behind a friend’s Greenwich Village hardware store. Donenfeld paid $100 a month.
Whose time is more valuable?
Many entrepreneurs struggle in the beginning with whether to get help for tasks they’re not familiar with, or save money and learn to do the work themselves. The answer may come down to deciding if your time is better spent on the basics. Getting customers and then fulfilling their orders or projects.
The answer for some is to work on the business during the daytime, and then spend evenings learning how to use record-keeping software. Others outsource, but can still find ways to keep their costs down. One option is to hire accounting students. Or people you know might be able to refer you to someone willing and able to work for less.
Use contractors
Volpatt has people who work for him, but they’re independent contractors, not employees so he doesn’t have to pay for benefits and employment taxes.
Volpatt “built a network of freelancers that continues to work with us today.”
The number of business services available over the Internet that help companies keep costs down keeps growing.
If you’re not sure how technology can save you money, talk to other business owners. You might also talk to a counselor from SCORE, which offers free advice to small businesses at www.score.org.
Joyce Rosenberg writes about small business issues for the Associated Press.
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