Home businesses are appealing to start for a variety of reasons; they give you more control over your environment, they’re somewhat less risky, and they’re usually far less expensive than typical startups. Even so, they can still put a huge financial burden on you if you aren’t prepared.
If you want to maximize your chances of becoming profitable and sustaining your business indefinitely, you’ll need to carefully manage your expenses and cut costs wherever possible—especially in the first few months, when you establish your first lines of revenue.
How to Save Money During the Startup Phase
Try using these strategies to save more money while creating your home business:
- Buy a home in an inexpensive area. You can’t have a home business without a home, so consider moving—and getting a home in a cheaper location. If you’re working remotely, you could have clients from all over the world, paying rates applicable to their respective locations. If you work somewhere with a much lower cost of living, you’ll stand to make an even higher relative profit.
- Turn part of your home into an office. If you’re going to work from home, make sure you’re fully capable of working from home. If you end up making multiple trips to the nearest copy center every time you need to print something, your costs will go up significantly (and you’ll waste time). Though it may not seem like a cost-saving measure, it’s actually a good investment to turn a room of your house into a dedicated home office, with everything you need to work completely.
- Seek a low-cost loan. If you end up moving to a new area, or if you’re buying a house specifically to support your home business, consider opting for a low-cost loan to mitigate its burden on your financial life. For example, you can choose to pursue an FHA home loan, which allows you to purchase a home with a much smaller down payment (and gives you a reasonable option if you don’t qualify for ordinary mortgage loans).
- Invest minimally in equipment. You might be tempted to buy top-of-the-line equipment for your new business, such as an all-new laptop, but that might not be necessary. Buying a used piece of equipment or a lower-tier model could end up saving you thousands of dollars at the start of your business, and might make only a marginal difference in your work performance. Think carefully about the features you’ll need the most, and whether new equipment is really necessary to get them.
- Resist the urge to hire. The idea of hiring people is exciting for new entrepreneurs, but remember that employees are going to be one of your most significant startup costs. It’s better to avoid hiring anyone until you absolutely need to, or until you have a very clearly defined position for them in mind. Until then, rely on independent contractors and other as-needed help to get you through.
- Lean on inbound marketing strategies. You’ll need to market your business, but instead of throwing money into advertising, consider investing your time and resources into inbound marketing strategies like search engine optimization (SEO) and content marketing. They cost far less and are more scalable over time, so you’ll see higher and higher returns on a consistently minimal investment.
- Focus on minimum viable products. Many entrepreneurs get hung up on trying to make their products or services “perfect” before they launch or start attracting customers, but there’s a danger to this approach. Every day you spend polishing your offers is a day you’ll be spending money—and not making any. It’s almost always better to launch soon, with an unfished-but-passable product that can earn you revenue, than to wait until everything is perfect to launch. Without revenue, your business can’t sustain itself indefinitely, so your priority should be getting money in as quickly as possible.
Revenue as a Foundation
Once your home business starts generating a steady stream of revenue, you’ll have more flexibility with your spending (and overall business development). If you spend too much too soon (even if you’re spending it on good things, like advertising and infrastructure), you might hit a financial wall before you develop the ability to sustain yourself.
Focus all your efforts on achieving an inflow of cash as soon and affordably as possible—and make everything else a secondary priority.
