Where you should never put your limited start-up cash (and the one thing you mustn’t skimp on)
One of the most frequent questions aspiring entrepreneurs ask me is “Where should I spend my limited amount of start-up money?” My answer is that it depends on the type of business you are starting.
A brick and mortar retail shop does need more start-up cash than an online information product business. There is inventory, rent, security deposits and possibly some fix-up/build-out work to be done. There are ways around spending on these items with barter, consignment, trade and other savings options which I have implemented myself and have written about on this blog. I have started successful businesses on very little cash and that is my number one suggestion for anyone starting a new venture.
There is only one thing I would borrow money for at start-up, but first, I’ll tell you what
I recommend you do NOT spend money on:
- High priced legal and accounting services. Yes, there will be a time when these are vital to your business but a l lot of new entrepreneurs waste time and money on establishing an LLC or Corporation and setting up expensive accounting systems long before they need to. Unless your business involves liability, just get started. Get whatever licenses you need, start as a sole proprietor and start making money. Of course if you are selling physical items in a state with sales tax, you will need to obtain a re-sale license right away. Keep your business money completely separate from your personal money. Then, when you are generating revenue, contact an attorney and set up a legal business entity to protect your assets and a good accountant to help you avoid unnecessary tax.
*note:I do highly recommend you purchase insurance if you have a brick and mortar location where you could be liable for injury to a customer. If you have inventory you will need to insure it for fire and theft as well. If your stock is on consignment. check with the artist or supplier to see if their insurance covers it while in your possession.
- Fancy office equipment, fixtures or build-out. You don’t need state-of the art technology unless you are starting a tech-based business. I’ve started every business with a pen and legal pad, off-the-shelf receipts and a cigar box for cash. Wouldn’t you rather hit your break even point and start building up a reserve than have a snazzy cash register? If you are doing your business online, you do need a working computer you can depend on but you do not need a lot of pricey software, nor do you need the fastest, best technology. Try to work with what you have until your business is generating enough to pay for it.
- An expensive website. Too many new entrepreneurs wait until they have the perfect website to start their business. That’s a huge waste. What you think you want in the beginning is almost never what ends up serving you and your clients best once your business is up and running. Do pay for a self-hosted domain and use a free WordPress theme to begin. I am absolutely not a techie and even I can set up a WordPress site in a day. Later, when you are generating enough income to pay for it, hire a WordPress expert to help you fine-tune the site to suit your needs. Have them teach you how to do it so that you can keep it updated yourself. Ideally, barter for their services. ( I learned this the hard way. I paid a Silicon Valley way too much money and wasted weeks waiting for them to create my dream site. I wasn’t in business long before I realized it did not fit my needs and replaced it with a WordPress blog which I can make changes to myself as my needs change.
The one thing I would spend money on, even if I had to borrow it, is education or consulting. I’m not talking about an elite platinum group coaching club where you pay $20,000 to $100,000 to spend 4 days a year with a coach in a group of people. (Yes those do exist and people vie for a spot in them.) Rather I am suggesting that if you know what you want to do but not exactly how to go about it, you hire someone who has done it successfully to guide you through the obstacles. It will pay you many times over to get it right the first time.
If you can’t afford one-on-one consulting which can be quite expensive, find a small group mastermind led by someone who is experienced in helping people work-through solutions. It doesn’t have to cost a bundle and it will be the single best investment you make in your start-up. If you are ready to take the first step toward making your dream business happen in 2012, go HERE to learn how you can get your ideas in front of 2 life-long entrepreneurs and problem solvers.