Few startups have the luxury of big budgets in their early days. This five-step plan will help take that shoestring budget the extra mile.
“A big business starts small,” as Richard Branson once said. If you have a great idea and no money, you are walking a well-worn path. Sadly, many fail – not through lack of enthusiasm but more from a lack of cunning.
Then comes the issue of timing: does launching a startup during a recession make strategic sense? Surprisingly, startups can do well during a recession – just look at the likes of Airbnb, Uber and Mailchimp, all established during the GFC in 2007-09.
However, no matter how brave you are or how strategic your plans, money can still be in short supply. So how can you start a business on a shoestring budget?
Step 1: Create a winning business plan
The business equivalent of the adage “a picture tells a thousand words” would have to be “a business plan is worth a thousand discussions”.
A business plan clarifies what you are really doing. And the only cost is the time to complete a template off the internet!
Calculate how much you need to fund your startup. Allow for set-up costs, equipment, working capital, line of credit and online billing systems.
Step 2: Plan ahead
If you’re employed and considering starting up a side hustle, use that regular income to your advantage. Save as much as you can: these savings are your startup’s working capital.
Next you will need a line of credit. Business loans aren’t really an option: banks generally shy away from lending to high-risk startups. But they will rush to give an employed person credit cards.
You could apply for as many credit cards as possible from banks and other providers – say four or five. Now you have a line of credit. (Be mindful of your repayment obligations and impacts to your personal credit rating!).
Next is the online billing system, such as PayPal. These are quick and cheap to set up.
Step 3: Your office
The challenge pre-COVID was spinning the line that you prefer a relaxed environment over a bustling office to give clients your full attention. Now, there’s no longer a need to explain why you’re using a coffee shop as your office.
ABS figures show roughly half the nation works from home in 2021. Cafes too have adapted to the new norm, with most now allowing long stays provided they don’t get crowded.
Embrace remote working and you’ve already slashed your startup costs!
Step 4: Get a customer
Assuming you can find customers for your great product or service, you now need to put that cunning into play.
Post COVID, even once-great customers have sad stories to tell. Play it safe and add another layer to your assessment of the customer risk profile. If they are in the travel business, for instance, you may need to pivot toward another industry entirely to find a financially strong customer base.
Nevertheless, the real skill to survive post-COVID is the same as always: turning paying customers into sustainable cash flow. To survive, you need more cash in than out. The aim is to get cash in quickly and defer cash out with longer payment terms.
Make it easy for customers to pay on-the-spot with cash, credit card or PayPal. Negotiate supplier terms as if your entire future depends on getting paid – because it does!
Step 5: Employ staff
Employing a stranger involves taking a compounded risk. The greater risk though is hiring a friend. Friends come and go but enemies accumulate. Why risk converting a friend into an enemy by employing them?
Don’t be lured into defending the virtues of your business plan: scrutinise candidates on their ability to address the task at hand.
Finally, remember to look after yourself. If you follow these steps, you are now in business competing with others who may be one step ahead of you.
- Alan Manly is the CEO of Universal Business School Sydney (UBSS) and author of The Unlikely Entrepreneur. To find out more, visit alanmanly.com.au