Recently I have found myself in the unique position to observe two completely different approaches to setting up a new business. The two parties involved are both in the same industry (alternative health) and are roughly the same age. However one is setting up his practice alone on a shoe string budget while the other has joined a multidisciplinary team and invested in a large (and expensive) facility. Which approach is better? Do you need to spend big to attract new customers or does increased spending just make your venture more risky? More likely to fail? Or does it attract a better clientele? Will having all the practitioners in the same place increase the lifetime value of their clients leading to greater profitability for all?
When it comes to these two businesses, only time will tell. But many people don’t have the luxury of choosing the all out approach and in those cases you have to be smarter. Limit your spending to areas that really count (hint: it’s not company stationary) like improving customer service with tools such as customer management software. By spending smart you can run your business on very little which means more profits to enjoy when you pull it off.
The next logical questions is what are the ‘essentials’ for a new business and what are the ‘nice to haves’. The basic essentials will be determined by your industry. There may be permits you need obtain or accreditation required. These are obviously must haves. Other unavoidable expenses also may be essential equipment you need to run your business for example a hairdresser needs scissors, just as a carpenter requires tools or a photographer can’t do without a camera. There are some universal items that any business should really have, such as a telephone number (which can be a mobile, you don’t necessarily need a 1300 number) and a basic business card. Is a website for a new business essential? In todays market I’d say not really. You see plenty of companies today that hold off on creating their own webpage and instead have a Facebook page or a listing on Google.
Then explore how you can obtain each of your essentials cheaper. Perhaps you could rent or lease equipment initially instead of buying it outright. Buy second hand or simply shop around for better prices on machinery and equipment.
One important word of caution. A few areas that are popularly regarded as ‘nice to haves’ are in actual fact ‘eesentials’. One of the most commonly overlooked essentials is business software, namely contact management software to build, service and nurture your client database. If you put the systems in place at the beginning to support customer retention and referral marketing you will be building your business on a strong foundation and protecting your most valuable asset, your customer database. And just like your other essentials contact management software can be achieved on a budget. While the big brand name providers may seem more attractive, the actual software provided by smaller companies is often just as good, easier to customize and much, much cheaper. A few of the better customer database providers will even give you your first 500 records free.
Even if you have the money to spend it pays to keep a reign on set up costs. The majority of businesses will experience slow periods and that cash can really help you through the rough patches. Spend where it matters and try to shop smart for the essentials as well.