When starting a business, knowing how much to spend in each area of your company is important. Here is a brief guide to help you skimp and splurge in the right places so that you can get the best out your budget.
When to SKIMP…
Unless you’re starting a hotel or setting up a factory, you don’t need large premises. In fact, you may not need to invest in premises at all for many trades – a lot of startups can be run from home. Once your business has grown to a substantial level, you can then consider relocating to an office. Don’t feel that you need an office to be successful – some of the biggest companies in the world including Amazon, Google and Disney began as home businesses.
As a startup, you also shouldn’t be splurging on employees. Unless you need a team of employees to survive (i.e. if you’re setting up a restaurant), you can do most of the work yourself. When it comes to niche roles like marketing and accounting, try to rely instead on outsourcing as this will be a lot cheaper than hiring in-house staff members.
A good quality website is important, but you don’t need to spend huge amounts on anything flashy to begin with. Aim to have a modern but basic website so that you’ve got web presence. Most web designers set their rates based on the complexity that their clients want and a basic website is likely to cost very little. You could even consider building your own website for free using WordPress – you don’t need any coding skills, although you will need an eye for design.
When to SPLURGE…
Small businesses are often targeted by cyber criminals because they have weak security. It’s worth paying extra for good quality security software as well as outsourcing network security. Physical security could also be worth investing such as a burglar alarm and CCTV. Don’t skimp on cheap software or a cheap alarm as it’s likely to be less reliable.
Understanding your market is vital as a new business. Spend money researching your competitors and creating surveys in order to create a product that meets consumer’s demands. It’s worth also researching your consumer base in order to find the best ways of reaching them so that you can create fine-tuned marketing campaigns – you’ll save more in the long run this way.
Good quality equipment tends to be more expensive, so it’s worth splurging in this area too. Cheap equipment is likely to be less reliable and it could reflect badly on your brand if it’s visibly poor quality. This doesn’t mean that you should splash out on the most expensive equipment out there – such equipment is likely to have features beyond your needs – however you should be considering mid-range equipment.