Spend every pound like it’s your last

By: Jonathan Rodger

Date: 10 May 2011

In the early stages of any business, it’s easy to spend heavily on all kinds of start-up costs. Each item may seem small in isolation, but they all add up. Without proper care you could be burdening your fledgling business with unnecessary overheads.

Even if you've managed to secure investment, your start-up capital should only be spent on things that add value to the business. This is especially true if you’re funding the business yourself. I question whether it is absolutely necessary to invest in the following four areas:

1 Offices

Do you really need them? They may make you feel more important, but do they really add enough tangible value in the early stages? As well as the obvious choice of working from home, there are many places you can use to “hot desk” and arrange meetings. Alternatively, see if you can rent a corner of someone else’s office. In these tough times, many businesses will welcome such a contribution towards their rent.

2 Staff

As well as the actual salaries, there are plenty of hidden costs associated with hiring staff, such as National Insurance contributions, holiday and sick pay, etc. In today's modern, flexible economy, it pays to use freelancers for tasks you can't do yourself.

3 Software

There are open source versions of most desktop software packages to cover most of your everyday requirements. An example is Open Office. The internet has made it easy for small software developers to publish a multitude of free and low-cost software applications, so take your pick and save some money.

4 Travel

Face-to-face meetings are sometimes important, but try to limit them to ones that are essential. With all the communication tools at your disposal such as video conferencing and free VOIP calls, you can cut your travelling expenses drastically.

Of course, there are moments when the purse strings just have to be loosened. The following three areas are essential to invest in wisely.

1 Product/service development

As a small business, your existence is defined by the quality of the products or services you offer. Make sure this is optimised to its full potential. Always be thinking of how you can improve and differentiate your service.

2 Image

How you present yourself is critical to ensure confidence – not only from your customers, but also your suppliers. As a minimum, make sure your logo and website exude style and reflect your business well. Good design is really important these days. A decent freelance designer should cost no more than around £250 per day. This is money well spent.

3 Customer service

This is easy to overlook when you’re pulled in several directions. But it is so important to make sure those precious first customers are really well looked after. Drop everything to deal with their queries. Treat them well and you’ll be rewarded in the long term with a loyal kernel of customers that will be unpaid ambassadors for your company.

So, my advice is invest sensibly in your start-up; avoid the big overheads for as long as possible; and keep a realistic view of how much time it will take for your business to gain real momentum.

Jonathan Rodger is managing director of email marketing service Message Horizon.