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How to reduce start-up cost and grow your business
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Start-ups are the new engine of economic growth worldwide. In fact, in the United States, they account for almost all new enterprises. However, beginning a new venture is a big challenge. Many entrepreneurs fail to make it. If you are planning on establishing a new venture, it is critical to do proper preplanning and due diligence before embarking on your venture.
5 Key steps to setting a business
The five steps are essential to starting a new venture. They increase the chances of success in your new venture.
1. Understand your motivation for the undertaking
2. Select a suitable venture
3. Conduct a feasibility study of the business
4. Review the start up needs
5. Develop a business plan
These steps are the bedrock of business success. Many entrepreneurs fail because of avoiding or ignoring the necessary steps.
Moreover, they fail to develop a business and marketing plan, which is a fatal mistake. So make sure to create a sound business plan. Furthermore, you must understand the market and the benefits of your products or services over the competition.
Besides, evaluate the demand for your products or services and possible market disruptions. And, review your assets, including business skills. Also, be confident and comfortable discussing your idea. Lastly, keep in mind that networking is vital for the success of the business.
Start-up costs, what are they?
The creation of a business plan is critical to starting a new venture. It is the detailed road map of your new venture. Also, a plan must evaluate the various start up costs for your enterprise.
Business start-up costs are the expenses you will incur during the process of beginning your new venture. These costs depend on the type of businesses. Different businesses have different start-up expenses. Remember that underestimating these expenses may falsely boost the expected net profit. It will not stand you in good stead.
Common start-up expenses include;
- Research expenses
Conducting proper research of the business is vital for success. It includes analyzing the industry and consumer makeup before the launch of your venture.
- Equipment and supplies
All types of companies must use some equipment and supplies. Determine if it’s better to lease or buy the equipment and supplies. Your initial capital will influence this decision.
- Marketing expenses
The new venture cannot market itself. Marketing the new business is critical; advertising and promotion efforts will attract clients.
- Technological costs
These expenses relate to software, information systems, and the costs of a website. Determine if outsourcing these functions will save money.
- Employee expenses
These costs relate to employee wages, salaries, and benefits. Your employees are a critical resource and need adequate compensation. Moreover, you avoid undesirable results, including adverse publicity. It could have disastrous consequences for your new venture.
- Debt costs
Your new undertaking requires initial funds to run. For small business owners, the most common source of capital is loans. It can include small business or personal loan. A credit will attract interest and fees. These are the costs of the debt.
- License, permit fees and Insurance
Most businesses must have licenses and permits, including health inspections and authorization. Your new venture may also need insurance cover.
How to reduce start-up cost and grow your venture
Reducing your initial costs will improve your bottom line and help your business to grow. This is because by reducing the costs you increase your initial working capital. Besides, the savings can fund other vital operations. It is a matter of making smart choices.
Measures to help you reduce your start-up expenses;
- Create and stick to your financial plan
A budget is critical to your cost reduction effort. You must have a clear idea of your income and costs. So write down all the expenses and fees required to get started. Then rank the expenses from critical to least important. Mark the less essential expenses as deferred costs. Utilize the funds for other critical operations.
- Alternative location
The costs are related to your place of business can be a burden. If you can change the situation, relocating to an alternative area can dramatically lower your business costs. Also, evaluate the possibility of sharing business space. Furthermore, this can also help you to network and expand your business relationships.
- Negotiate prices and make deferred payments
Negotiation is a critical skill in entrepreneurship. Always negotiate prices with the vendors and suppliers when making purchases for your venture. Try to reduce the costs as much as possible. Also, implement a system of deferred payment for your enterprise. Negotiate with your suppliers to accept delayed payments.
- Reduce your communication costs
We are in the information and digital age. The internet is a great communication tool. It can help you reduce your communication costs. So use Skype to communicate with your customer and suppliers. Also, use free services like Gmail, yahoo, outlook, WhatsApp, etc. to interact with your customers and suppliers. These are fantastic communication tools, and these are free!
- Hire interns
Your business will need staff. Employing full time staff can be expensive, especially in the beginning. Consider offering internships to fresh college graduates seeking to gain experience. In fact, by hiring them, you get your work done at a much cheaper cost. Use the balance for other essential operations.
- Buy refurbished office furniture and equipment
Brand new office furniture and equipment is an immense expense. You can reduce costs by opting for refurbished equipment and furniture. Often, there are as good as brand new ones. Besides, it’s offered by the manufacturer at a discounted price.
Start-ups are the new engine of economic growth worldwide. However, beginning a new venture is a big challenge. Reducing your initial costs will improve your financial position and enable your business to grow. In fact, by reducing the costs, you will increase your initial working capital. Besides, you can use the funds for other business operations.
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