The Honest Guide to Starting a Business – Article #3
In today’s world people are starting businesses at every stage of life. Whether they’re university dropouts, parents or retirement entrepreneurs. This means that everyone’s situation is different in regards to financing their business.
We all know of stories of people who started on a shoestring and worked creatively to build massive success, meanwhile others invested small fortunes on failed ventures.
Many people like the idea of starting a business with a bank loan, or using their mortgage as collateral. While this does have its place in certain cases, its important to think hard about whether you really need to borrow money to start a business.
Successful entrepreneurs, such as Mark Cuban and Sam Walton, believe that capital or money is never short, just peoples creativity and vision is what’s lacking.
Also, people tend to be more careful when spending money they earned, rather than money that was borrowed. This is a crucial step to get right. Otherwise, if your business fails to get going, you’ll be spending many years paying back the money borrowed.
5 steps to get the most out of any budget:
- Remember the 80/20 rule – 80% of the results come from 20% of the work. Focus your resources and money on the things that work.
- Invest in things that will achieve x10 ROI in 5 – 10 years. Consider the opportunity costs of your economic decisions and make the best trade-off possible.
- Don’t spend money on ego – flashy company uniforms, large startup salaries, expensive office spaces, over-engineered websites, etc.
- Always keep reserves for a rainy day or for unexpected costs
- Only borrow money when it’s absolutely necessary and suited to your personal situation
The above 5 steps can bring clarity to establishing your small business budget and instil confidence for you to move forward without wasting resources. If you would like some support or mentoring around your budget or for a growth hacking strategy feel free to get in touch with Waking Giants who can help your business get off the ground.